What is the term for the cost associated with changing suppliers?

The term for the cost associated with changing suppliers is "switching cost." This refers to the expenses incurred by a company when it decides to move from one supplier to another. These costs can include not only financial aspects, such as contractual penalties or the costs of negotiating new agreements, but also the time and resources needed to establish a relationship with the new supplier. Additionally, there may be indirect costs tied to the potential disruption in operations while the transition takes place.

Understanding switching costs is crucial in supply chain management and strategic decision-making, as businesses often look to minimize these costs in order to foster flexibility and adaptability in their operations. Switching costs can act as a barrier to competition; if they are high, customers may prefer to stick with a current supplier rather than risk the costs and uncertainties associated with a change.