The Quantum Leap: Next Generation

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There are several advantages to converting to single-source suppliers. In single sourcing, suppliers have a negotiated contract. The challenges of qualifying a second source and the potential for higher costs of ensuring quality from the backup supplier offset any disadvantages. It often proves worthwhile to pay tooling costs for a second supplier, even if the need for the supplier is unlikely. Whether or not to qualify a second supplier is a business decision in which added costs must be balanced against possible long lead times and quality problems should issues develop with the single-source supplier. With single-source suppliers, purchased volumes should not amount to more than 30 percent of the supplier's business. An amount greater than 30 percent puts the supplier on shaky ground if the manufacturer's business drops. If such a supplier goes out of business, supply problems for the Demand Flow manufacturer quickly develop. Manufacturers that account for more than 30 percent of a company or division of a major corporation are the exception to this rule.

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