Which of the following increases supply chain risks?

The correct answer highlights how a reduction in the number of suppliers can increase supply chain risks. When a company relies on fewer suppliers, it becomes more vulnerable to disruptions caused by a variety of factors, such as natural disasters, economic instability, or operational issues at the supplier’s end. If one of the few suppliers experiences problems, there may be no alternative sources to turn to quickly, leading to potential delays in production, increased costs, or diminished product availability.

This reduction narrows the scope of available resources and can create a reliance that may backfire if the single or limited suppliers cannot meet demand or fulfill contracts. By contrast, maintaining a diverse supply base through multiple suppliers helps distribute risk, as issues affecting one supplier might not have the same impact on the supply chain overall.

In comparison, options such as long-term contracts, utilizing multiple suppliers, and standardization generally promote stability and reliability in supply chain management. Long-term contracts can encourage collaboration and ensure a consistent supply, while multiple suppliers can mitigate the risks associated with relying on a single source. Standardization can simplify processes and help maintain quality across different suppliers, reducing variability and enhancing predictability.