APICS Certified Supply Chain Professional (CSCP) — Question 270

A firm that is experiencing a supply constraint for a fast-selling product determines that a reason for the constraint is the investment required to expand capacity. Which of the following types of contracts would be most appropriate for the firm to offer the supplier to increase output?

Answer options

• A. Cost sharing
• B. Revenue sharing
• C. Buyback
• D. Joint venture

Correct answer: A

Explanation

The correct answer is A, Cost sharing, as it allows both the firm and the supplier to share the investment costs associated with expanding capacity, incentivizing the supplier to increase output. The other options, such as Revenue sharing, Buyback, and Joint venture, do not specifically address the need for shared investment in capacity expansion, making them less suitable for this scenario.