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

• A. To avoid specialization and maintain flexibility in sourcing
• B. To reduce transaction costs and improve supply chain reliability
• C. To increase the number of suppliers and promote competition
• D. To maximize short-term profits by frequently switching suppliers

Answer: (B)

Verified step by step guidance

1. Understand the concept of transaction costs, which include the costs of searching for suppliers, negotiating contracts, and enforcing agreements.
2. Recognize that forming long-term relationships with a few dedicated suppliers can reduce these transaction costs by creating trust and smoother coordination.
3. Consider how long-term relationships improve supply chain reliability by ensuring consistent quality, timely delivery, and better communication.
4. Contrast this with having many suppliers, which might increase competition but also increase transaction costs and reduce reliability.
5. Conclude that organizations strive for long-term supplier relationships primarily to reduce transaction costs and enhance supply chain stability, rather than to avoid specialization or maximize short-term profits.