What defines a supply chain risk?

The definition of a supply chain risk centers around the potential for a disruption in the supply chain. This encompasses any event or factor that could interrupt the flow of goods and services, which can have significant impacts on operations, customer satisfaction, and overall business performance.

Understanding supply chain risks is crucial for managers, as it allows them to implement strategies to mitigate these risks and ensure continuity in the supply chain. Events such as natural disasters, supplier failures, geopolitical issues, or unexpected changes in demand can all represent risks that threaten the efficient operation of a supply chain.

While the cost of goods sold, supplier delivery times, and stock turnover rates are important metrics in supply chain management, they do not inherently define a supply chain risk. These metrics can be influenced by risks but do not capture the concept of disruption itself. Identifying and managing potential disruptions is essential for maintaining operational resilience and achieving long-term success in supply management.