What Is A Sole Supplier Agreement

The following list of criteria can be used to determine whether there is a single source: simple sourcing reduces logistics costs following a reduced supplier base (Burke et al., 2007). Single sourcing decisions are generally made at the strategic and management level, where purchasing and procurement managers must determine whether and how much value are added to single-source relationships (Leenders et al., 2002). It is often chosen in order to reduce the cost of materials, as the placement of all purchase requests often allows for better purchasing conditions for a single supplier. Preconditions for a single purchase decision include previous commitments, successful past relationships or a long-term relationship with a supplier. In addition, it may be justified that the supplier can offer a unique or exceptional quality, that the order is so small that it is not worth sharing, that the concentration of purchases results in price/cost reductions or that the use of just-in-time with a single supplier is simpler. The downside of this strategy is the buyer`s increasing reliance on the supplier. In addition, it is very difficult to compensate for the pros and cons of Single Sourcing (Van Weele, 2010). Dependence on a supplier can lead to a number of risks, such as constant price increases. B, a decline in quality or delivery, slowed or continuous improvement programs (Leenders et al., 2002). The ultimate solution is not to have a purchasing situation from a single source.

For example, in some cases, such as government warrants, it is important to ensure that both parties cannot be charged with corruption. It is precisely for this reason that many governments insist that tenders be launched and that all monopolistic tendencies be eliminated. However, the only market is for purchases for which there is only one supplier supplying the product. In general, these are unique products that you can`t find anywhere, but only by a supplier/manufacturer. The main difference between a single source lender contract and a single source contract is choice. If you are dealing with a borrower from a single source, you can compare different creditors based on factors such as price and quality. Once these options are evaluated, select the provider from a single source that best meets your needs and needs. On the other hand, a single source provider does not give you options, as that credit provider is the only credit provider that can provide you with the products and goods you need. In other words, this credit line is the only source of the product you need, so you have to make a deal with that lender, even if the cost is more than what you want to pay.

However, if you are dealing with a single source, the options are much more limited, as it is very difficult to switch providers unless you radically change your requirements. But if you`re dealing with a single source of supply, your options are much less limited because it`s less difficult to switch suppliers. In this situation, it is imperative that the small business have an excellent supplier relationship and welcome more suppliers as soon as the company has developed enough to make it a viable offer.