External supply chain risks and internal supply chain risks are vital concepts in the digital business environment. For instance, these two types of risks can disrupt a supply chain. External supply chain risks are from outside of the organization. Thus, they are harder to predict and require more resources to overcome. They include demand, supply, environmental, and business risks. Alternatively, internal supply chain risks are within a company’s control. They constitute manufacturing, planning, and control, mitigation, and contingency risks. Notably, supply chain risk management refers to the strategic process of identifying, assessing, and mitigating supply chain risks. Thus, SCRM applies risk management process tools to deal with uncertainties caused by logistics-related activities, products, or resources.
TYPES OF INTERNAL AND EXTERNAL SUPPLY CHAIN RISKS
External supply chain risks are beyond the control of a company. First, demand risks result from unpredictable customer demand. Secondly, supply risks are caused by interruptions to the production flow. Thirdly, environmental risks are related to economic, social, governmental, and climate factors. Lastly, physical plant risks are due to the condition of a physical facility. Alternatively, internal supply chain risks are within the control of the business. They include manufacturing risks caused by disruptions of internal operations. Secondly, planning and control risks are due to inadequate assessment and scheduling. Thirdly, mitigation and contingency risks are caused by not putting alternative solutions in place. Fortunately, supply chain risk management is a comprehensive approach to the control of all types of uncertainties.
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THE SUPPLY CHAIN RISK MANAGEMENT PROCESS AND CYCLE
Supply chain risk management involves risk identification, assessment, and mitigation. First, risk identification includes recognizing the types of risks. For instance, internal supply chain risks are within the control of a company, such as planning and control uncertainties. On the other hand, external supply chain risks are beyond the control of an organization, such as environmental uncertainties. Secondly, risk assessment includes understanding the potential risk sources and impacts on the overall business operations. Lastly, risk mitigation defines both preventive and reactive action plans. For instance, enhancing end to end visibility and applying cybersecurity practices. Therefore, SCRM is often combined with the aspect of supply-chain resilience to promote continuity and sustainability of the business.
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