Upstream Risks and Vulnerabilities
For situation A, there is a form of flooding of suppliers in the same geographical region. The two Tier 3 suppliers have the mandate of supporting the three Tier 2 suppliers, and involves the risk of geographical concentration. The suppliers in the situation are all located in a flood zone, and this is often risky for the downstream buyers who end up having low supply capabilities. The situation also has a greater upstream risk to other suppliers on the same level as competition becomes stiff. Buyers in the lower downstream level are the ones who often suffer from such a situation because of their vulnerability nature.
In situation B, there is only one Tier 3 supplier who supplies products to all the Tier 2 suppliers. There is a greater risk of a single supplier in the upstream level. Other suppliers who are often vulnerable in this situation can lack or miss on important products and services from the main supplier who enjoys the monopoly. There is also a risk of increased costs because of the personal decision the supplier can make without any consultation. The upstream suppliers suffer most and can end up lacking on important products for their customers in the long run.
To ensure better multi-tier supplier relationship management, there is a need to employ outsourcing capabilities which often help in reducing costs, increase a number of products to market for pu…
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