What challenge arises from having fewer suppliers in a supply chain?

Having fewer suppliers in a supply chain leads to higher dependence on those suppliers. When a company consolidates its supplier base, it reduces the number of sources from which it can procure necessary materials or components. This can simplify procurement processes and potentially lead to stronger relationships with remaining suppliers, but it also means that the company becomes more vulnerable to risks associated with those suppliers.

If one of the few suppliers experiences disruptions due to unforeseen circumstances, such as natural disasters, production delays, or financial instability, it can significantly impact the company's operations and ability to fulfill customer demands. This dependency can exacerbate issues if the supplier fails to deliver on time or if there are quality problems, as there are fewer alternatives available to mitigate these risks. Maintaining a diverse supplier base is generally seen as a strategy to reduce this kind of risk, as it provides options for sourcing and can enhance overall supply chain resilience.