Describe the switching costs that a company would incur if i

Describe the switching costs that a company would incur if it began to phase out its current suppliers and pick new suppliers. How would you suggest this company reduce its switching costs? Explain with an example. Please write in your own words, and atlest 2 paragraphs.

Solution

The switching cost that a company would incur if it began to phase out its current supplier and pick new suppliers are as follows:-

1) The time lost in paper work while switching to new supplier from current supplier as time is considered as money.

2) Cost of searching of new best supplier

3) Financial and social risk as the supplier is new to the company.

4) It may also include some fees of exiting the current supplier.

5) The cost of relationship that may be broken with thecurrent supplier.

These switching costs may be reduced if better alternatives are being followed. There should be proper analysis of allthe alternatives available & there should also be Cost- benefit analysis of all the available alternatives. The resources should be used in best possible manner as well.