Supply Chain Risk Types & Sources

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Supply Chain Risk Types & Sources

Juttner, (2005) defined Supply chain risk sources as any variable which cannot be predicted with certainty and from which disruption can emerge. Waters, 200 noted that supply chain risk is any event that might affect the flow and movement of material from initial supplier down to the final consumer. Building from the above definitions, supply chain risk is any factor that can course interference in the supply chain (supplier > manufacturer > distributor > retailer > consumer). Manuj and Mentzer, (2008) categorized four distinct risk in global supply chain: supply, demand, operational, and security risk

Supply risk is the possibility of an event occurrence associated with inbound supply that may cause failures from supplier(s) or the supply market, such that the outcome results in the inability of the focal firm to meet customer demand within anticipated costs, or causes threats to customer life and safety (Zsidisin et al. 2004). Supply risks reside in the course of movement of materials from supplier's suppliers to the focal firm, and include reliability of suppliers, single versus dual sourcing, make or buy decisions, centralized versus decentralized sourcing, and security issues.

Operations risk is the possibility of an event associated with the focal firm that may affect the firm's internal ability to produce goods and services, quality and timeliness of production, and/or the profitability of the company. Sources of operational risk reside within the firm and may result from a breakdown in core operations, inadequate manufacturing, or processing capability (Simons 1999), high levels of process variations, changes in technology that may render the current facilities obsolete, and/or changes in operating exposure.

Demand risk is the possibility of an event associated with outbound flows that may affect the likelihood of customers placing orders with the focal firm, and/or variance in the volume and assortment...
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