Risk adverse supply chain and supply chain risk
-Risk adverse supply chain : A risk adverse supply chain is chosen or operated when both demand and raw material supply is unpredictable. It may also be combined with some of the other supply chain strategies when there is uncertainty around suppliers and logistics networks. Large inventory levels and work in progress are observed in this type of supply chain, and may be commonly observed in countries which have poor infrastructure or economic and political instability. This type of supply chain strategy can also be used when demand is quite stable, but there are production, supply, and logistical risks present to deliver finished goods to customers. In these cases it is difficult to achieve full capacity utilization due to the presence of these inefficiencies. An example of this type of supply chain would be oil/petrochemical industry and the grains/agricultural industries.
The pros of this type of supply chain :
-Ability to provide products to customers without major interruptions
-Can withstand raw material supply delays without affecting customer deliveries
-Can respond to peak customer demand
The cons of this type of supply chain:
-May require large volumes of raw materials and WIP, this must be controlled carefully
-Requires large working capital requirements, and incurs larger inventory holding costs .
-May require outsourcing of certain activities such as some manufacturing and logistics to handle peak demand
-Business risk may difficult to quantify because of greater third party involvement, inefficient and unpredictable suppliers
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