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35 Supply Chain Risk Management Terms

35 Supply Chain Risk Management Terms

In the world of supply chain management, it sometimes feels like we’re navigating a labyrinth, where every turn reveals new challenges and opportunities.

The intricacies of this domain can be overwhelming, especially when we wade into the complexities of managing risks.

But with the right terminology, we can better understand the routes within our supply chains and deal with potential hiccups before they become hazards.


This blog isn’t an intimidatingly towering lexicon of academic phrases or vague business jargon. Instead, we’re diving deep into the sea of supply chain risk management (SCRM) while speaking your language. Let’s demystify 35 crucial SCRM terms, one by one, to empower you with the knowledge to mitigate risks effectively and run a tight, resilient supply chain.


Supply Chain Risk Management Terms




  1. Supply Chain Risk: Any event that can disrupt the flow of goods or services within the supply chain.


  2. Resilient Supply Chain: A flexible supply chain structure capable of withstanding and recovering from disruptions.


  3. Risk Assessment: The identification and evaluation of potential risks in a supply chain.


  4. Risk Identification: The process of recognizing potential risks before they occur.


  5. Risk Quantification: Assigning values to recognized risks based on their potential impact.


  6. Risk Prioritization: Evaluating risks to determine which to address first based on their likelihood and potential impact.


  7. Risk Mitigation: The process of implementing strategies to reduce the likelihood and impact of identified risks.


  8. Risk Transfer: Shifting risk from one party to another through contracts, insurance, or other mechanisms.


  9. Risk Tolerance: The amount of risk a business is willing to accept in pursuit of its objectives.


  10. Risk Acceptance: A deliberate decision to take no action regarding a particular risk as it falls within the established risk tolerance.


  11. Bullwhip Effect: A phenomenon where small fluctuations in product demand result in significantly larger fluctuations in demand as we move further up the supply chain.


  12. Single Point of Failure: A part of the supply chain that, if disrupted, can cause the entire chain to collapse.


  13. Strategic Risks: Risks related to the direction and scope of a company.


  14. Operational Risks: Risks arising from the day-to-day operations of an organization.


  15. Financial Risks: Risks related to the financial structure of the organization or to the markets and financial instruments it uses.


  16. Compliance Risks: The risk of legal or regulatory penalties, financial loss, or material impact on reputation resulting from failure to comply with laws, regulations, and prescribed practices.


  17. Supply Chain Visibility: The ability to track raw materials and components from their origin to the final product.


  18. Supplier Risk: The potential for failure of a supplier to deliver goods or services on time or meet quality standards.


  19. Logistics Risk: Risks associated with transportation, warehousing, and distribution of goods.


  20. Lead Time: The amount of time between the initiation and completion of a production process.


  21. Demand Forecasting: The process of using historical sales data to predict future consumer demand.


  22. Inventory Management: The supervision of non-capitalized assets that cannot be sold directly to customers.


  23. Just-in-Time (JIT) Inventory: An inventory management strategy that aligns raw-material orders from suppliers directly with production schedules.


  24. Safety Stock: Extra inventory kept on hand to reduce the risk of running out of key products due to unexpected changes in demand, under-forecasted demand, and/or disruptions in the supply chain.


  25. Supply Chain Disruption: An event that prevents an organization from continuing the uninterrupted provision of goods or services to consumers.


  26. Business Continuity Planning (BCP): The process of creating systems of prevention and recovery to deal with potential threats to a company.


  27. Contingency Planning: The creation of a predetermined course of action to be put into place in the event of a major supply chain disruption.


  28. Crisis Management: The way in which an organization responds to a critical situation.


  29. Risk Retention: A strategy where a company decides to assume the risk and its potential financial consequences.


  30. Supply Chain Resilience: The capacity to resist, recover, and adapt to disruptions in supply chain operations.


  31. Disaster Recovery Plan (DRP): A documented process or set of procedures to recover and protect a business IT infrastructure in the event of a disaster.


  32. Sourcing Strategy: An organization’s plan for how it will procure goods or services.


  33. Risk Pooling: The practice of consolidating risk from several business units and managing it from a central office.


  34. Reverse Logistics: The process of moving goods from their typical final destination for the purpose of capturing value or proper disposal.


  35. Scenario Planning: A management tool to make flexible long-term plans.



Wrap it Up!

Each of these terms represents a piece of the complex puzzle that is the supply chain, and understanding them is like having a map to guide you through the labyrinth. By taking the time to comprehend and apply them, you can avoid dead ends, adapt to shifts, and build a supply chain that not only survives but thrives in the face of adversity.

The journey to mastering supply chain risk is ongoing, and updating your understanding of these terms is just the first step. The next is to implement them within the fabric of your supply chain strategy, leveraging their insights to make your operation more efficient, secure, and prepared for whatever the future holds.

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