Under what conditions might you consider singlesourcing an i

Under what conditions might you consider single-sourcing an item in the leverageing category of the portfolio matrix?

Solution

Answer :-

Commodities that have unique requirements or niche suppliers yet are significant to the business.Such items tend to be expensive, due to the exclusive market position maintained by the supplier.On optimal strategy might be to scan the market place and develop an agreement with a supplierto enable a streamlined accounts payable and receiving process.

The single sourcing strategy implies that the company is supplied from a single source for a determined period of time. The supply has a medium to high level of asset specificity, since the goods and services often are directly linked to the buying firm’s core competencies. An asset is specific when it is related uniquely to a specific transaction, and when it is less valuable in other transactions (Skjøtt-Larsen et al., 2007). But there are exceptions where the goods and services are not directly linked to the firm’s core competence. In a highly technological company for example, it is not uncommon to use a single source for the staff food commissary. This business is not close to the company’s core competence, and yet they use a single sourcing strategy in order to facilitate the handling of the supplier. The advantages of single sourcing are higher quality and lower total costs as well as a link to higher cooperation between buyer and supplier (Berger & Zeng, 2006). Single sourcing involves more permanent ties and the development of closer cooperative relationships (Skjøtt-Larsen et al., 2007). But again, there are exceptions to this rule. Customers can choose to buy a product from several suppliers when the product is important to them, in order to secure the quality and access. When a product is of less importance the customer might choose to buy from a single supplier instead, in order to purchase the product or service in a simple manner.