Why do firms assess their sourcing capabilities when considering the factors of production?

• A. To increase the number of employees regardless of productivity
• B. To reduce the quality of their final products
• C. To avoid investing in new technology for production
• D. To ensure they can obtain necessary inputs efficiently and at competitive costs

Answer: (D)

Verified step by step guidance

1. Understand that firms need various inputs (factors of production) such as labor, capital, and raw materials to produce goods or services.
2. Recognize that assessing sourcing capabilities means evaluating how well a firm can acquire these inputs in terms of availability, cost, and quality.
3. Realize that efficient sourcing helps firms minimize production costs and maintain or improve product quality, which is crucial for competitiveness.
4. Consider that without proper sourcing, firms might face shortages, higher costs, or delays, negatively impacting their production process.
5. Therefore, firms assess their sourcing capabilities primarily to ensure they can obtain necessary inputs efficiently and at competitive costs, supporting smooth and cost-effective production.