Why would a business want to ensure that its supply chain is diverse?

• A. To limit its access to new markets and technologies
• B. To reduce the risk of disruptions caused by relying on a single supplier
• C. To make its production process less flexible
• D. To increase its fixed costs and reduce profitability

Answer: (B)

Verified step by step guidance

1. Understand the concept of supply chain diversity: It means having multiple suppliers or sources for inputs rather than relying on just one.
2. Recognize the risks of relying on a single supplier: If that supplier faces problems (like natural disasters, strikes, or financial issues), the business's production can be severely disrupted.
3. Analyze how a diverse supply chain reduces risk: By having multiple suppliers, the business can switch between them if one fails, ensuring continuous production.
4. Consider the impact on flexibility: A diverse supply chain generally increases flexibility, allowing the business to adapt to changes in demand or supply conditions.
5. Evaluate the effects on costs and profitability: While managing multiple suppliers might increase complexity, it usually helps avoid costly disruptions, which can protect profitability in the long run.