The Advantages of Multiple Sourcing Can Be Viewed as the Disadvantages

question 42

True/False

The advantages of multiple sourcing can be viewed as the disadvantages of single sourcing and vice versa. The best scenario would be one that can obtain the advantages of both.This might be done by applying significant pressure to single-source suppliers or by providing significant certainty to suppliers in a multiple-sourcing environment.This may be accomplished through the use of contract length. Short-term contracts regardless of single or multiple suppliers can be used as a source of punishment. In some instances, long-term contracts can be viewed as a reward.

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Definitions:

Opportunity Costs

The cost of an alternative that must be foregone to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.

Make Total Cost

An approach to calculate the comprehensive cost of manufacturing a product, including raw materials, labor, and overheads.

Buy Total Cost

The total expense incurred to purchase an item or service, including the purchase price and any additional fees or expenses.

Variable Expenses

Costs that vary in total in direct proportion to changes in business activity levels or volumes, such as sales commissions or raw material costs.