Question

Selecting the most appropriate number of suppliers a firm should use

has been the subject of continuing debate.

Internal considerations could influence the decision to use a single-source or a multiple-source approach.

Multiple sourcing decision supporters argue that having more than one supplier increases the amount of competition, greater supply risk mitigation, and improved market awareness can arise.

Single sourcing decision supporters argue that purchase volume with a single supplier with the hopes of enjoying lower costs per unit and increased cooperation and communication in the supply relationship.

However, single sourcing might actually reduce their alternatives and ultimately raise the price they pay.

Answer 1

The debate over choosing single or multiple suppliers touches upon core business considerations like cost, communication, and risk management. It is part of supply chain management and is influenced by factors like competition intensity, market information asymmetry, and the impact of new technologies on firm size. The decision balances the benefits and drawbacks of exclusive partnerships versus diversified supply networks.

Step-by-step explanation:

The subject at hand is determining the most appropriate number of suppliers a business should use, which is integral to supply chain management.

This decision is influenced by various internal and external considerations, such as production costs, consumer demand, and the balance between competition and large-scale efficiency.

The choice between single-sourcing and multiple-sourcing can impact a firm's operational strategy, risk mitigation, and market positioning.

Internal factors for a firm involve assessing the benefits and risks associated with single-sourcing, such as lower costs through bulk purchasing and enhanced cooperation, against the flexibility and competitive advantages of multiple-sourcing.

These choices are linked to broader economic principles, such as the effects of the number of sellers on supply, competitive market entry, and large-scale efficiency against competition.

Moreover, in an environment of rapidly evolving information and communication technologies, firms must navigate the trend towards either a concentration of large dominant firms or a dispersion of small players reaching wider markets.

Also, decisions on raising financial capital are influenced by the level of information asymmetries present in the market. Policymakers and businesses must continually adapt to the trade-offs between promoting competition and reaping the cost benefits of large-scale production.