Certification in Supplier Diversity Practice Exam

The term 'supplier fragmentation' refers to what concept?

1. The division of suppliers by geographical area

2. The presence of many small suppliers in a market

3. The concentration of spending among a few suppliers

4. The automation of supplier-related processes

The correct answer is: The presence of many small suppliers in a market

The term 'supplier fragmentation' accurately refers to the presence of many small suppliers in a market. This concept highlights a market condition where numerous smaller suppliers operate within an industry, as opposed to a market dominated by a few large providers. Supplier fragmentation can lead to a diverse supply chain, offering various options for procurement but also complicating management due to the varying capabilities, standards, and reliability of these suppliers. This condition often challenges larger organizations in terms of maintaining efficient relationships and ensuring quality control across such a diverse supplier base. In contrast, the other options relate to different aspects of supplier dynamics or market conditions. The division of suppliers by geographical area pertains more to logistics and distribution rather than fragmentation itself. The concentration of spending among a few suppliers describes a situation of supplier consolidation, which is the opposite of fragmentation. Lastly, the automation of supplier-related processes deals with efficiency improvements in managing suppliers rather than indicating their size or number in the market. Thus, recognizing the presence of many small suppliers characterizes supplier fragmentation effectively.