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Supply Chain Risk Essay

1558 words - 7 pages

Supply Chain Risk

Daniel T. Powell

TLMT441, I001, Spring 13

American Public University

Stacey Little

August 15, 2013


There are risks that hit the supply chain every day, and can put a lasting effect on a business. Through proper mitigation techniques and planning those risks can be minimize. There are several risks that can come up, both external and internal. Internally for a business it is a little easier to manage the risk, but it is not necessarily how big the risk is, but how fast a business can return itself back to normal. This paper will provide details of what risks are within the supply chain, the effects those risk can cause, and how it proper risk management ...view middle of the document...

The supply chain according to Chopra, Sunil, and Meindle (2004)“A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request.” The supply chain itself contains everything from manufacturers and suppliers to the transportation system and the customer actually receiving their product. Some of the departments within the supply chain consist of things such as customer service, operations, distribution, and finance just to name a few. As Chopra, Sunil, and Meindl mention in their text, the supply chain can come in different stages that could include customers, retailers, wholesalers/distributors, manufacturers, and raw material suppliers. It is easy to see with so many moving parts in the supply chain how it can be prone to attracting risk.
The second important thing to understand is what the definition of risk is. Risk could simply be described as anything that can cause a company to come out with a loss or less than expected returns as mention by Poirier, Quinn, and Swink (2009, p. 208). They even go further to mention it from a business perspective of not meeting objectives or promises made to the market place. Included in the shortfalls description is the “failing to capitalize on an opportunity or to respond to and unwanted even” (Poirier et al, 2009, p. 208).
When it comes to the supply chain and risks within it, they can be categorized into two different parts, one being external and the other being internal. According to Queensland Government (2013) article “External risks can be driven by events either upstream or downstream in the supply chain.” It is broken down into 5 main types of external risks. The first, demand risk, is marked by not being able to fully know what the demands of the consumer are going to be. The second risk, supply risks, which consist of any type disruption to the flow of need parts or materials. The third risk, environmental risks, are things that happen outside of the supply chain such as inclement weather or something as serious as terrorist threats. The fourth risk, business risks, can be caused due to instability in a supplier’s management or financial department as well as a purchase or sale of an existing supplier’s company. The fifth risk, physical plant risks, deals with problems that arise among or in the supplier’s facility.
On the other side of the supply chain spectrum there are internal risks. These risks can be mitigated a lot easier simply because they are within the business. This allows for a better opportunity of maintaining stable control of risks, (Queensland Government, 2013). Like external risk, internal also have 5 main types of risk. The first risk being manufacturing risk involves disruptions within the operation environment. The second risk is business risk, but not the same as external, the internal version involves personnel changes, changed structural development, or things like how purchase orders are communicated to suppliers and...

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