A medium-sized manufacturer is evaluating a small specialist supplier for a critical component. The supplier’s quoted price is attractive and its technical sample meets the specification. However, awarding the full contract would make the manufacturer responsible for approximately 65 percent of the supplier’s annual sales. The manufacturer expects demand to increase sharply over the next 18 months, and any failure to scale would stop production at two plants. What should the sourcing team treat as the main concern before selecting this supplier?

Question

Answer

The supplier should be selected because the approved sample proves that it can support future volume growth without further assessment.

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The supplier should be selected because the buyer’s large share of its revenue will create stronger influence over its priorities.

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The supplier should be reconsidered only if it is financially larger than the buyer and therefore able to reduce the buyer’s leverage.

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The supplier should be reconsidered because the buyer may create overdependence and expose itself to scaling and continuity risks.

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A medium-sized manufacturer is evaluating a small specialist supplier for a crit...

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