What kind of supplier strategy involves choosing fewer suppliers to increase collaboration with them?

The strategy that involves choosing fewer suppliers to enhance collaboration is single sourcing. This approach allows a company to build stronger relationships with its selected suppliers, leading to better communication, increased trust, and a more streamlined supply chain. By focusing on a limited number of suppliers, businesses can negotiate more favorable terms, share critical information more easily, and collaborate on product development or innovation, which can ultimately enhance product quality and reduce costs.

In contrast, multiple sourcing refers to the practice of using multiple suppliers for the same materials or components, which may reduce reliance on any single supplier but does not foster the same level of collaboration. The preferred supplier strategy can involve selecting certain suppliers that meet specific criteria for quality or reliability, but it doesn’t necessarily limit the number of suppliers as single sourcing does. Diversified sourcing aims to mitigate risk by spreading purchases across various suppliers, which can protect the business from supply disruptions but also makes deep collaboration less feasible.