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Problem

Adopting the perspective of an organizational buyer, carefully illustrate how the most economical source of supply might be the firm that offers the highest price but also the fastest and most reliable delivery system.

Step-by-step solution

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Step 1/3

Suppliers form an essential cog in the wheel of supply chain management. The manufacturers rely heavily on suppliers in order to provide them the requisite raw materials at the given time and quantity in order to meet the demand from the consumers.

Step 2/3

Reliable and faster suppliers provide with greater return on investment as compared to less expensive and ineffective suppliers. This is mainly because a manufacturer is able to produce the good at a faster rate when the supplies are provided in the lesser time.

Hence in case a manufacturer that makes a particular good to be available faster is generally preferred over those companies that la behind in making the goods available. Therefore, the manufacturer is able charge higher profits in return of providing the product at earliest.

Step 3/3

A reliable supplier also allows a manufacturer to deliver the product at a particular given time. This also enhances the reputation of the manufacturer and makes loyal customers for the company. This in turn allows a continued flow of revenue for the company.

Thus, the higher price charged by the suppliers are compensated in terms of higher profits from the consumers and loyal customers that become a continued source of revenue for the company.