1Pros And Cons Of Working With Large Suppliers 3 Why is less

1)Pros And Cons Of Working With Large Suppliers

3) Why is less number of suppliers beneficial to the purchasing department and to the firm?

Solution

1. The advantages of working with large suppliers are:

(a) advantages of economies of scale - a large supplier gets the benefit of economy of scale which it can pass to you in the form of lower costs

(b) lower risk of delay in supply when compared to working with a small scale supplier

Disadvantages are - (a) large suppliers do not work towards gaining competitive advantage in minority communities. Thus you will not be able to make use of the opportunities as presented by the changing demographics.

2. Suppliers are a key cog in any company\'s value chain. The quality of the supplier determines the quality of a company\'s output. For example a car manufacturer like Ford buys car batteries, tyres steering system from suppliers. If the steering system is of low quality, the reputation and brand equity of Ford will go down. Hence companies have to make sure that the suppliers are good and they deliver goods of highest quality. Thus, resources will have to be committed for this.

3. Less number of suppliers will reduce the complexity for the purchasing dpartment in terms of decision making. It will simplify things and most importantly will make the purchase department exercise control and monitor effectively the quality of components being supplied by the suppliers.