It is interesting to know that in today's time, the supply chains are very complex. To guarantee the delivery of products in the right quantity, to the right destination and in the most cost effective manner, it is imperative to handle the parallel physical and information flow well. With more and more companies trying to work around the Just In Time (JIT) Model, thereby reducing the buffer inventory, the supply networks are becoming more vulnerable. A disruption in the supply can have a huge impact on the supply network.
Supply Chain Risk is the threat of interruptions to the proper working of the supply chain. There are a number of factors which account for the risks and can be classified into internal and external risks. Risk in demand, supply and environment account for the external risks. Process Risk and Control Risk account for the internal risks, which are internal and specific to the organization. Process Risks deal with the disruption of value adding or managerial activities in an organization and Control Risks deal with the risk involved with the systems, assumptions, rules that an organization follows to control these processes e.g. batch size, batch quantity etc. Another type of internal risk is Mitigation and Contingencies Risk which is the risk involved with the mitigation and contingency plan of the organization.
One of the simplest way of analyzing risk is to begin with mapping the supply network. In this, one needs to identify relationships and build a structure of supply chain members. One should narrow down on each risk and decide the chance of occurrence and the severity of loss if that happens. Appropriate actions can be taken to tackle the critical risks.
I know you're now thinking... Business Administration is soooo cool !!!