Question

Describe THREE factors that may influence the appropriate type

of supplier relationship for a purchasing organisation. A diagram
or matrix may be used to support your answer.

Answer 1

Three factors influencing the appropriate type of supplier relationship include the market structure, cost of inputs, and the pace of technology and innovation. Each of these can dictate whether short-term or long-term relationships are more beneficial for a purchasing organisation.

Step-by-step explanation:

There are several factors that may influence the type of supplier relationship suitable for a purchasing organisation. Here are three key factors:

1. Market Structure: The level of competition within an industry can determine the nature of supplier relations. In a highly competitive market, a purchaser might opt for short-term contracts to leverage lower prices, while in a less competitive environment, long-term relationships might be more advantageous for ensuring supply security.
2. Cost of Inputs: The variability and predictability of input costs are crucial. If a purchasing organisation is exposed to significant fluctuations in input costs, it might develop closer relationships with suppliers to secure more stable pricing and supply terms.
3. Technology and Innovation: When rapid technological changes are prevalent, a purchasing organisation may benefit from strategic partnerships with suppliers that facilitate innovation and fast adoption of new technologies, thereby gaining a competitive edge.