Question

Discuss 3 challenges associated with supplying to low-cost producers?

Answer 1

There are different challenges. The first challenge is the allocation of resources for supplying and servicing to the low cost producers. There is a low profit margin and it becomes very difficult for the organization to make dedicated supply to the low cost producers. The second challenge is the continuity problem as far as the supply relationship with these producers are concerned. Any better deal with other producers with higher profit margin, will be tempting to terminate the supply relationship with the low cost producers. The third challenge is to maintain the quality parameters and specifications of the goods and materials, as prescribed by the low cost producers, because high quality demand higher profitability and low cost producers don’t permit it.
Above issues create challenges with the supplying to low cost producers.