Depending on a few suppliers creates a higher risk of a single point of failure
1. Single Point of Failure
2. Lack of Diversification
Relying on a small number of suppliers limits the diversification of resources and increases vulnerability to supply chain disruptions.
3. Reduced Negotiating Power
Limited supplier options diminish the company's leverage for negotiation, leading to higher costs and less favorable contract terms.
4. Supply Chain Disruptions
Disruptions in the supply chain, such as supplier bankruptcy or natural disasters, can have a cascading effect on production and delivery schedules.
5. Limited Innovation
Few suppliers can restrict access to innovative products, services, and technologies, hindering the company's ability to stay competitive.