Glossary term
Supply Chain Risk
Subject: Risk Management, Third-Party Risk
Also known as: Supply chain risk management, SCRM
Supply chain risk is the chance that disruption, failure or misconduct at any point in the network that makes and delivers goods and services interrupts supply, raises cost or harms the buyer's reputation.
Explanation
A supply chain runs from raw materials through manufacturers, transport and storage to the final customer. Risk can appear at each step: a factory fire, a port closure, a supplier going bankrupt, a shortage of a single component, a cyber attack on a logistics provider, a quality defect, or forced labour found deep in the chain. Logistics risk, covering transport delays, damage, loss and customs problems, is one part of it. Supply chain risk management is the discipline of mapping suppliers, finding single points of failure, holding buffer stock, using second sources and monitoring early warnings. Newer laws also require buyers to check labour and environmental conditions among suppliers. Cyber threats to software suppliers are a separate branch of the same problem. One weak link can stop production, so buyers map where a single plant or port carries the whole flow.
Example
A phone assembler learns that one specialised chip comes from a single plant. A flood closes the plant for two months. Because the risk team had already identified this dependency, the assembler holds eight weeks of stock and has qualified a second maker, so output falls by only a small share instead of stopping.
Not to be confused with
- Supply Chain Attack
- A supply chain attack is a cyber intrusion through a supplier's software or services. Supply chain risk covers every kind of disruption across the network.