A sourcing team is deciding whether to renew a contract with a supplier that has historically performed well on a high-volume component. Recent financial checks show that the supplier is still paying creditors on time and has acceptable liquidity. However, delivery promises have become less reliable over the past three months. During a site visit, the team notices unused production cells, fewer experienced supervisors on the floor, and longer queues at final inspection. Managers explain that after losing a major customer, the supplier reduced staff and postponed equipment maintenance. The buyer needs stable delivery and flexibility during seasonal demand peaks. What should the sourcing team do before renewing the contract?

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Answer

Give more weight to the financial check because acceptable liquidity and creditor payments show that the supplier can still meet the buyer’s performance requirements.

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Give more weight to the lower workload after losing a customer because reduced demand from other buyers should make capacity more available for this contract.

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Give more weight to the site-visit evidence because the supplier’s operating capacity and flexibility may no longer support the buyer’s delivery requirements.

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Give more weight to the historical performance record because a supplier that performed well in the past should remain suitable unless a formal default has occurred.

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A sourcing team is deciding whether to renew a contract with a supplier that has...

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