Supply Chain and Logistics Supply Chain Risk Management 1 ā Questions and Answers
Question 1: Which type of supply chain risk arises from a single supplier being the sole source for a critical component?
- Demand risk
- Single-source dependency risk (Correct answer)
- Currency fluctuation risk
- Transportation delay risk
Correct answer: Single-source dependency risk
Single-source dependency risk occurs when only one supplier can provide a critical input, leaving the buyer vulnerable if that supplier fails.
Question 2: A company maps all its suppliers, their suppliers, and beyond to identify hidden vulnerabilities. This practice is called:
- Supplier auditing
- Spend analysis
- Supply chain mapping (n-tier visibility) (Correct answer)
- Vendor managed inventory
Correct answer: Supply chain mapping (n-tier visibility)
N-tier supply chain mapping extends visibility beyond direct (Tier 1) suppliers to uncover risks embedded deeper in the supply chain.
Question 3: Which risk mitigation strategy involves holding safety stock to protect against supply disruptions?
- Risk transfer
- Risk avoidance
- Risk buffering (Correct answer)
- Risk sharing
Correct answer: Risk buffering
Risk buffering uses inventory buffers (safety stock) or capacity reserves to absorb supply or demand shocks.
Question 4: A black swan event in supply chain risk management refers to:
- A predictable seasonal demand spike
- A rare, high-impact, hard-to-predict disruption (Correct answer)
- A minor supplier quality defect
- A routine freight delay
Correct answer: A rare, high-impact, hard-to-predict disruption
Black swan events are highly improbable, high-consequence disruptionsāsuch as a pandemic or major natural disasterāthat are difficult to anticipate.
Question 5: Which of the following best describes the 'bullwhip effect' as a supply chain risk?
- Overproduction due to machine breakdowns
- Demand signal distortion that amplifies order variability upstream (Correct answer)
- Customs delays caused by incorrect documentation
- Price volatility in raw material markets
Correct answer: Demand signal distortion that amplifies order variability upstream
The bullwhip effect is when small fluctuations in end-customer demand get magnified as orders travel upstream, causing excess inventory or shortages.
Question 6: When a company transfers supply chain risk to an insurer by purchasing cargo or business interruption insurance, this is an example of:
- Risk avoidance
- Risk acceptance
- Risk transfer (Correct answer)
- Risk reduction
Correct answer: Risk transfer
Risk transfer shifts the financial burden of a potential loss to a third party (such as an insurer) rather than bearing it internally.
Question 7: A supply chain resilience strategy that uses multiple geographically dispersed suppliers for the same component is known as:
- Sole sourcing
- Dual/multi-sourcing (Correct answer)
- Consignment stocking
- Cross-docking
Correct answer: Dual/multi-sourcing
Dual or multi-sourcing spreads procurement across several suppliers in different regions, reducing reliance on any one source and geographic concentration risk.
Supply Chain and Logistics Supply Chain Risk Management 1
Which type of supply chain risk arises from a single supplier being the sole source for a critical component?