Having a single supplier will certainly reduce the amount of logistic and distribution cost of your company because you only have to deal with one company to provide your basic raw material. But while having a single supplier may have its advantages, it is important to note that it has several disadvantages as well. It is important to look at the facts in a unbiased point of view so that you will be able to know if this kind of strategy can be practiced in your company.
Some of the greatest advantages of having a single supplier is that you can be assured that the quality of the raw materials you bought are consistent with the previous batches. This makes the quality assurance of your company easier to conduct and you can expect to have lesser production difficulties and even lesser customer complaints. Having a single supplier will also enable you to establish an intimate relationship with your supplier because they will be able to understand your specific requirements. In addition, the said supplier will also aim to please you because you are ordering products from them in huge quantities.
Other advantages of having a single supplier is that they can be involved in your product development since they already have a lot of experience in this field. You can also expect that the suppliers will be willing to be involved in the design process that your company sometimes needs to go through. Your relationship with the supplier will certainly be better if they are your sole provider because this will establish a cooperative relationship between the two companies rather than a competitive relationship.
Along with these advantages though, come several disadvantages. One of the most obvious disadvantages is that you will become highly dependent on a single supplier to give you all the raw materials you need. So in case an unforeseen event happens and affect your supplier adversely, your business will likewise suffer. You will also have lesser negotiating leverage if you become dependent on a single supplier who supplies your needs. And then there is the issue of complacency, the supplier may become complacent because they know that you can not find a better supplier than them. Thus they may not provide you with the necessary service you deserve.
There are some businesses that do decide to stick with one supplier though because of the above mentioned advantages. However, there are also suppliers that decide to take advantage of having several suppliers to lessen their exposure to risks. Actually though, you can take advantage of both. You can do this by having a single supplier but at the same time you also know of a back up supplier who can satisfy your requirements when the first supplier fails to deliver.
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