Business – 6.1 External influences – Competitors and suppliers | e-Consult
6.1 External influences – Competitors and suppliers (1 questions)
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When supplier reliability declines—through late deliveries, quality issues, or capacity constraints—a company must adjust its inventory policies to avoid stock‑outs and production delays. Unreliable supply typically leads to higher safety stock levels, more frequent ordering, and tighter monitoring of lead times.
Mitigation strategies:
- Safety Stock & Buffer Inventory: Increase safety stock for critical components to cover variability in delivery times. This cushions production against unexpected delays.
- Diversify the Supplier Base (Dual Sourcing): Establish relationships with alternative suppliers for key inputs. If the primary supplier fails, the secondary source can fulfill orders, reducing dependence on a single unreliable partner.
- Supplier Performance Monitoring: Implement a systematic performance review (e.g., scorecards) to track on‑time delivery and quality, enabling early detection of reliability issues and proactive renegotiation or replacement.
By adjusting inventory levels and diversifying supply sources, a business can maintain continuity of operations even when supplier reliability fluctuates.