Question

One of RDC's major components for the N20 product is a passive electronic component (C100). in conducting an analysis of this component, the c100, the RDC procurement management has determined that this component has a high profit impact on the n20 but, owing to the larger number of available suppliers, a low risk of supply disruption. the optimal strategy for him to adopt would be

a. develop long-term contracts with the current supplier and carrying enough stock to compensate for the lead time

b. redesign the product to eliminate the c100 component

c. to focus on cost reduction by going to bid between suppliers and encouraging competition

d. develop a good personal relationship with the current supplier

e. bring the manufacture of the c100 component in-house

Answer 1

The optimal strategy for managing the procurement of the C100 component for RDC's N20 product, given its high profit impact and low supply risk, is to encourage competition among suppliers by focusing on cost reduction through competitive bidding.

Step-by-step explanation:

The subject question discusses procurement strategy for a passive electronic component known as C100, used in RDC's N20 product, which has a high profit impact but a low risk of supply disruption due to the availability of multiple suppliers. The optimal strategy in such a scenario would not be to develop long-term contracts with just the current supplier, as it doesn't leverage the competitive market. Instead, a better strategy would be to focus on cost reduction by inviting bids from multiple suppliers. This encourages competition, which can lead to more favorable terms and could result in significant cost savings for RDC, without compromising on supply continuity given the low supply risk. Building good relations is beneficial but would not be the primary strategy in this context, and the other options of redesigning the product or bringing the manufacturing in-house do not directly address the question of how to leverage the supplier market to the company's advantage.