Why might an organization strive to form long-term relationships with a few dedicated suppliers?

• A. To minimize communication and coordination with suppliers
• B. To avoid specialization and maintain flexibility in sourcing
• C. To increase the number of suppliers and promote competition among them
• D. To reduce transaction costs and improve reliability in the supply chain

Answer: (D)

Verified step by step guidance

1. Understand the concept of transaction costs, which are the costs associated with making an economic exchange, including searching for suppliers, negotiating contracts, and monitoring performance.
2. Recognize that forming long-term relationships with a few dedicated suppliers can reduce these transaction costs by lowering the need for frequent negotiations and extensive monitoring.
3. Consider how long-term relationships improve reliability in the supply chain by fostering trust and better coordination between the organization and its suppliers.
4. Analyze why minimizing communication and coordination is not the primary goal, as long-term relationships often involve ongoing communication but with greater efficiency.
5. Evaluate why increasing the number of suppliers or avoiding specialization might increase complexity and transaction costs, which is contrary to the goal of reducing them.