When the cost to replace a supplier is high, how can a lead firm most effectively improve the supplier's performance?

• A. Switch to a different supplier regardless of the cost
• B. Invest in training and technology upgrades for the supplier
• C. Reduce orders to pressure the supplier to improve
• D. Ignore supplier performance and focus on internal production

Answer: (B)

Verified step by step guidance

1. Understand the context: When the cost to replace a supplier is high, it means switching suppliers is expensive or difficult, so the lead firm needs to find alternative ways to improve supplier performance without changing suppliers.
2. Evaluate the options: Consider the impact of each option on supplier performance and the relationship between the lead firm and the supplier.
3. Analyze why switching suppliers regardless of cost is not ideal: High replacement costs make this option inefficient and potentially harmful to the firm's operations.
4. Consider investing in training and technology upgrades: This approach improves the supplier's capabilities and efficiency, leading to better performance while maintaining the existing relationship.
5. Recognize that reducing orders or ignoring performance may harm the relationship or fail to address the root causes of poor performance, making investment in supplier development the most effective strategy.