I was talking with a distant uncle about his stationery manufacturing business. He had 8 workers and among other things, he supplies to a well-known stationery company.
Me: If you are supplying to them, you must be earning in millions.
Uncle: Oh, no. We are not their sole suppliers. They have like 50 of us.
Me: Can you not take more business from them.
Me: Why don’t you just double the machinery and double the labor and double your income?
Uncle: It’s very difficult to manage large labor. They make excuses and form union and they bicker about pay when due to requirement, you hire someone new at a higher price when the older person is working at lower price…..
My takeaway from the conversation
The big company was acting as a trader and offloading manufacturing stress to multiple firms which decreased the reliance on any one supplier or laborer. That’s powerful.