Supply chain vulnerability

These are supply chain relationship risks that emanate from the nature, structure and management of relationships with suppliers. Different risks attach to different types of relationships sourcing approaches and supply chain configuration decisions.

Supply chain relationship risk

  1. Single sourcing arrangement – Leads to vulnerability to risks of supplier failure complacency or leverage.
  2. Outsourcing arrangements leading to vulnerability to reputational, performance and marketing risks. This is due to confidential data sharing.
  3. Long term relationship relation – Partners may turn out to be under performing, incompatible and strategically complacent.
  4. Supplier tiering – Where the buying organization develops partnership relations with few leading providers who take responsibility for managing lower level tiers of the supply chain. This may lead to insufficient supply chain transparency which may lead to quality risks.
  5. Supplier switching – This may cause switching costs especially where strong relationships have been established and plans or investments made. This may lead to risks such as loss of knowledge and exposure to new supplier risks.

Techniques for supply chain risk management

  1. Supplier evaluation and selection.
  2. Multiple sourcing, performance and contract management.
  3. Demand and inventory management levels of buffer stock to cover delays or disruption.
  4. Logistics Management.
  5. Contract development and management.
  6. Insurance for a range of risks.
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