In an effort to reduce total cost of ownership (TCO), a company is outsourcing a major component to an overseas supplier. What is the most appropriate action to reduce supply chain risk?

Question

Quizplus · Accepted Answer

The best choice to reduce supply chain risk when outsourcing to an overseas supplier is to deploy strategic inventory buffers. This ensures that the company has sufficient inventory to meet demand in case of any disruptions in the supply chain, such as delays in transportation or quality issues with the outsourced component. Increasing forecast accuracy may be helpful, but it does not mitigate the risks associated with outsourcing. Investing in redundant manufacturing processes would be too costly and not practical for reducing risk in this scenario. Negotiating a competitive cost contract for transportation may lower costs but does not address the issue of supply chain risk.

In an Effort to Reduce Total Cost of Ownership (TCO)