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

• A. To reduce transaction costs and improve supply chain reliability
• B. To ensure suppliers remain interchangeable and easily replaced
• C. To avoid specialization and maintain flexibility in sourcing
• D. To increase the number of suppliers and maximize competition

Answer: (A)

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 interchangeable suppliers, which might increase transaction costs and reduce reliability due to less commitment.
5. Conclude that organizations aim for long-term partnerships to balance efficiency and reliability, rather than maximizing competition or avoiding specialization.