Question

Discuss 5 benefits of supplying to low-cost producer?

Answer 1

A low cost producer can be defined as an organization that produces and sells goods at a low cost.

The following are the 5 benefits of supplying to low- cost producer:

1. Stability: When supplying to low cost producer the suppliers can expect a stable business without much changes, reason being price sensitive consumer will always reach out to these producers.

2. Logistics: Since the demand for the goods are almost stable, logistics and other supply chain management activities can be handled effectively by the suppliers.

3. Market share: Typically low cost producers has a huge market and it keeps expanding, hence suppliers business can grow along with low cost business. For eg Wal-Mart

4. Revenue: Since the investment is comparatively low for the suppliers and since the cost of services like logistics, warehousing etc are minimal the expected revenue could be high when supplying low cost producer.

5. Contract period: Since the low cost business are targetted for a long period the suppliers can have a decent time period to do business with them.