Supply Chain Management Risk Management 4 — Questions and Answers
Question 1: What is 'dual sourcing' as a supply chain risk mitigation strategy?
- Ordering the same item twice to ensure delivery
- Qualifying two suppliers for the same component to reduce single-source dependency (Correct answer)
- Using two logistics providers for the same lane
- Splitting a purchase order between two warehouses
Correct answer: Qualifying two suppliers for the same component to reduce single-source dependency
Dual sourcing maintains qualified alternative suppliers for critical components, ensuring supply continuity if the primary supplier experiences a disruption.
Question 2: Which type of supply chain disruption is most likely to be caused by a cyberattack on a logistics provider?
- Natural disaster risk
- Cyber/technology risk (Correct answer)
- Demand variability risk
- Regulatory compliance risk
Correct answer: Cyber/technology risk
Cyberattacks targeting logistics systems, such as ransomware, can halt order processing, shipment tracking, and warehouse management operations.
Question 3: A risk assessment reveals a supplier has a 70% on-time delivery rate. The appropriate response is to:
- Immediately terminate the supplier contract
- Increase safety stock and develop an alternative supplier simultaneously (Correct answer)
- Accept the performance and move on
- Switch entirely to in-house production
Correct answer: Increase safety stock and develop an alternative supplier simultaneously
Poor supplier performance warrants both a short-term buffer (safety stock) and a long-term solution (qualifying alternatives) to balance continuity with strategic improvement.
Question 4: What does 'risk appetite' mean in the context of supply chain management?
- The total dollar value of inventory at risk
- The level of risk an organization is willing to accept in pursuit of its objectives (Correct answer)
- The number of suppliers classified as high-risk
- The percentage of orders that can be delayed without penalty
Correct answer: The level of risk an organization is willing to accept in pursuit of its objectives
Risk appetite defines how much uncertainty an organization is prepared to accept when pursuing strategic goals, guiding decisions on risk mitigation investment.
Question 5: Which of the following is an example of an 'environmental risk' in supply chain management?
- A supplier raising prices by 10%
- A hurricane disrupting a major Gulf Coast port (Correct answer)
- A new competitor entering the market
- A customer reducing order volumes
Correct answer: A hurricane disrupting a major Gulf Coast port
Environmental risks include natural disasters like hurricanes, floods, and earthquakes that can disrupt infrastructure, logistics, and supplier operations.
Question 6: In supply chain risk management, what is a 'risk register'?
- A software tool for tracking shipment locations
- A documented record of identified risks, their likelihood, impact, and mitigation plans (Correct answer)
- A list of approved suppliers and their risk ratings
- A financial report on supply chain losses
Correct answer: A documented record of identified risks, their likelihood, impact, and mitigation plans
A risk register is a centralized document that catalogues all identified supply chain risks along with assessments and assigned mitigation actions.
Question 7: Which supply chain strategy is most effective for managing risks in highly volatile demand environments?
- Lean manufacturing with minimal inventory
- Agile supply chain design with flexible capacity (Correct answer)
- Long-term fixed-price supplier contracts
- Centralized single-warehouse distribution
Correct answer: Agile supply chain design with flexible capacity
Agile supply chain design emphasizes flexibility and responsiveness, allowing rapid adjustments to production and distribution in response to demand fluctuations.
Supply Chain Management Risk Management 4
What is 'dual sourcing' as a supply chain risk mitigation strategy?