A firm wants to reduce the supply base for a particular product from three to two suppliers. Which of the following is the BEST course of action for this firm to take?
A.
Negotiate with new suppliers to put pressure on the current suppliers
B.
Cease conducting business with the most difficult supplier and retain the other two suppliers
C.
Reassess the firm's supplier selection process
D.
Select two suppliers based on past performance and negotiate more favorable pricing
To reduce the supply base from three to two suppliers, the firm should evaluate the past performance of the current suppliers and select the two that have consistently met or exceeded performance expectations. This ensures that the firm retains reliable and high-performing suppliers. Once the selection is made, the firm can negotiate more favorable pricing with the chosen suppliers, leveraging the increased business volume that comes with consolidating orders.
References
Purchasing and Supply Chain Management by Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, and James L. Patterson
"Supplier Performance and Evaluation" - Chartered Institute of Procurement & Supply (CIPS)
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