A company develops annual forecasts for key products and enters into annual contracts with key suppliers based on the forecasts. Which of the following benefits would the company most likely receive from this approach?
Entering into annual contracts with key suppliers based on forecasts typically allows a company to negotiate better pricing due to the guaranteed volume over a set period. Suppliers are more likely to offer discounts and favorable terms when they have a predictable and steady demand. This approach can also lead to cost savings from bulk purchasing and long-term relationships, contributing to lower procurement costs. While shorter delivery lead times, improved service, and higher-quality products are potential benefits, the most direct and likely benefit from this approach is lower prices.
References:
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2020). Purchasing and Supply Chain Management. Cengage Learning.
Burt, D. N., Petcavage, S., & Pinkerton, R. (2010). Supply Management. McGraw-Hill Education.
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