Which type of sourcing arrangement is characterized by a complete reliance on a supplier?

Which type of sourcing arrangement is characterized by a complete reliance on a supplier?

• A. Single sourcing
• B. Multiple sourcing
• C. Dual sourcing
• D. Transactional sourcing

Answer: (A)

Single sourcing is characterized by a complete reliance on a supplier because it involves selecting one supplier for a particular product or service. This type of arrangement means that the buyer does not engage with any other suppliers for that specific need, creating a dependency on the chosen supplier. This can foster a strong partnership and potentially lead to better pricing, lower transaction costs, and increased collaboration in product development. However, it also means that any disruption, such as supply issues or changes in the supplier's business, can significantly impact the buyer’s operations. In contrast, multiple sourcing involves using several suppliers for the same product or service, reducing reliance on any one supplier and enhancing security against supply disruptions. Dual sourcing, while similar to multiple sourcing, specifically refers to selecting two suppliers to mitigate risk while still having a primary supplier. Transactional sourcing focuses on obtaining goods or services based on price and availability rather than establishing long-term relationships or dependencies, which is not the essence of complete reliance on a single supplier.

Single sourcing is characterized by a complete reliance on a supplier because it involves selecting one supplier for a particular product or service. This type of arrangement means that the buyer does not engage with any other suppliers for that specific need, creating a dependency on the chosen supplier. This can foster a strong partnership and potentially lead to better pricing, lower transaction costs, and increased collaboration in product development. However, it also means that any disruption, such as supply issues or changes in the supplier's business, can significantly impact the buyer’s operations.

In contrast, multiple sourcing involves using several suppliers for the same product or service, reducing reliance on any one supplier and enhancing security against supply disruptions. Dual sourcing, while similar to multiple sourcing, specifically refers to selecting two suppliers to mitigate risk while still having a primary supplier. Transactional sourcing focuses on obtaining goods or services based on price and availability rather than establishing long-term relationships or dependencies, which is not the essence of complete reliance on a single supplier.