ESSAY: Financial Difficulties

Financial Difficulties

Discuss a situation in which a purchaser might select a supplier that is having financial difficulties. Your post should be in APA format with in-text citations and a reference list.

ANSWER

Choosing a Supplier with Financial Difficulties

            The selection of a supplier is a central determinant of the benefits extended to the customers in the supply chain. Profoundly, it is essential to know the financial health of the supplier to adjust and organize supply sources or have a better understanding of options to undertake. In most cases, it is challenging to note when a supplier is troubled financially. With an excellent reputation, however, it would be worth to consider a supplier with financial difficulties.

            Suppliers determine the efficiency of the purchaser in receiving raw materials, manufacturing, storage, and distribution to the end-users. When a supplier is in financial difficulties, most purchasers reduce their reliance due to risks exposed to the operation of a business (Munnery, 2019). This information is available on the suppliers’ credit history and confessions from other purchasers. One of the conventional approaches by purchasers in this situation is choosing an alternative supplier to avoid the potential risks (Munnery, 2019). However, not every supplier with excellent financial health assures efficiency in the supply chain.

            Reputation means that a supplier has a sustainable history on the relationship with its purchasers. In this situation, the purchaser is assured of quality, convenience, consistency, and cost competitiveness with the supplier, with financial difficulty being the only barrier (Info Entrepreneurs, 2020 b). As a result, the purchaser engages the supplier with a legally binding agreement to find an alternative source of income as it maintains a healthy relationship in the supply chain. Additionally, low cost and financial stability are not everything in the long run so, when choosing a supplier, the purchaser needs to consider reliability, quality, and services offered (Info Entrepreneurs, 2020 b). The right supplier is dependent on the business’s specific needs, which can be implemented by developing a service level agreement that considers the potential costs and risks (Info Entrepreneurs, 2020 a). More importantly, the purchaser might consider making a partnership relationship with the supplier to ensure ease passing of risks when there is an omission on the agreed terms. The supplier has an opportunity to have financial support while maintaining a good reputation…