What are the advantages and potential disadvantages to Red Fish, Blue Fish of having China as its sole source of supply? What do you recommend?
Reduction of unit cost
Red Fish, Blue Fish can have the benefit of unit cost reduction due to bulk purchases as they use Liu-Sheng Trading as a sole source of supply for all their orders.
Red Fish, Blue Fish can have the benefit of loyalty discounts, Liu-Sheng would perceive Red Fish, Blue Fish as brand loyal customer and give discounts in the long run.
Credit and favourable credit terms
For using Liu-Sheng Trading as a sole source of supply, Red Fish, Blue Fish would stand an opportunity to establishing credit account and have more favourable credit terms.
Exceptional or distinguished treatment
Due to the established business relationship and loyalty, Red Fish, Blue Fish would stand an opportunity distinguished treatment than any other customer e.g prioritisation of service, stock reservation.
Consistent quality standard
Through the use of one supplier Red Fish, Blue Fish would have consistent quality of their products.
Through the use of one supplier Red Fish, Blue Fish would have customization of their products. Liu-Sheng would take their inputs for the improvement of products into serious consideration and for implementation.
Red fish would stand an opportunity to form an alliance with Lui-Sheng in the long run. This alliance would be of mutual benefit to both parties.
In a long run Red Fish, Blue Fish can buy shares from Lui-Sheng and vice-versa.
Loss of sales when Liu-Sheng runs out of stock
When there’s stock in Liu-Sheng there would be stock out in Red Fish, Blue Fish and since there would be no alternative supplier to them this would lead to loss of sales.
Loss of sale when Liu-Sheng delivers incorrect supply or quantities When there’s...
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