When a firm is looking at the number of suppliers they should have, it is important to take into consideration the type of business they have as well as the type of relationship they are hoping to have with their supplier.
For example, when a brokerage is looking to get professional photos on all current and future listings, they would benefit from having one photography supplier. One of the advantages of having one supplier is the ability to build a long term partnership that allows both parties to develop methods and expectations that will lower costs. “These close partnerships often lead to high levels of dependency between the customer and the supplier” (Vonderembse, & White, 2013). Because the brokerage uses one photography company, the ordering and delivery process is seamless and the turn around time is quick. In addition, the cost per photo decreases because of the amount that is ordered and the loyalty they show each other. It is important that both the brokerage and the photography company develop contingency plans to deal with unexpected problems that may occur.
The photography company may choose to outsource the editing process and benefits from having multiple suppliers. The reason this works is because no one company can edit the photos fast enough to get them back to the brokerage the following day. By having multiple suppliers the photography company can divide the editing work, and instead of getting photos back 24 hours later, they are able to get edited photos back and sent to the brokerage within 12 hours. One of the disadvantages this could have is the consistency in quality editing from the multiple sources, it is important to have each supplier deliver the same level of quality.
In conclusion, when determining if a firm should have one supplier or several, it is crucial to look at the business structure and determine the type of relationships needed to be successful. A large grocery chain will benefit from forward vertical integration, while a brokerage needing photos has no need for it.
Vonderembse, M. A., & White, G. P. (2013). Operations management [Electronic version]. Retrieved from https://content.ashford.edu
Should a firm attempt to have fewer or more suppliers? What are the advantages and disadvantages of each approach?
My initial response is that it depends on the situation. Looking at it from my organization we have areas where we utilize dozens of suppliers and some where we have only one. The advantage to having fewer or even just one supplier is that these, “relationships enable both parties to work together for greater integration of the supply chain and for development of methods that can improve quality and lower costs,” (Vonderembse & White, 2013, Chap. 5.4). The reason behind having one, in my example, is that it makes it easier to customize those products or services. We use one vendor for all of our shipping supplies. We have customized shipping containers and product specific packaging materials that they have developed around our specifications. In this way we have a working partnership with this vendor.
On the other side of the discussion, we distribute almost 20K different SKUs. In order to carry such a diverse selection for our customer we have dozens of supply vendors. Because of our sales volume, these vendors compete for space within our building especially those with like items. We also have our own manufacturer that produces generic versions of our most popular items. I would relate this to the backward vertical integration discussed in our text (Vonderembse & White, 2013). This gives us flexibility on what products we produce and gives us a competitive advantage over the brand name items, at least from a cost perspective.
Vonderembse, M. A., & White, G. P. (2013). Operations management [Electronic version]. Retrieved from https://content.ashford.edu/
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