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Question: When selecting suppliers, the characteristics of the components needed can play a significant role. Two of these characteristics are profit impact and supply risk, as discussed in Kraljic's supply matrix. In this problem, we consider the example of automobile transmission systems under this framework.

a) Why do transmission systems have a relatively high profit impact? Contrast this with one or two examples of items needed by an automobile manufacturer that have low profit impact.

b) Why do transmission systems have a relatively high supply risk? Contrast this with one or two examples of items needed by an automobile manufacturer that have low supply risk.

c) Toyota, for example, invests substantial effort into building good relationships with its suppliers. Why is it important that an automobile manufacturer maintains good relationships with suppliers of transmission systems? Support your reasoning with your answers from items (a) and (b).

Management Theories, Management Studies

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