Your company has long relied on a single supplier when procuring a key component for your best-selling product. With product sales still increasing, your top management is increasingly worried about the dependence on this single partner. Your company has, therefore, decided to move to dual sourcing. In the future, the key component will be procured from two sources: the existing supplier and a new, yet to be identified, second supplier.

The management accounting team has been asked to support this initiative with appropriate information and analyses. In particular, the team is asked to prepare an answer to the following questions:

• Which coordination mechanisms between the company and its two suppliers will be appropriate in the future setting?
• Which factors should be taken into account when allocating purchase quantities between the two suppliers?
• Which information should be exchanged between the three partners, and how can the necessary conditions be created?
• Which aspects of supplier performance need to be monitored and measured in the future?