One of the Key functions of supply management is
to ensure smooth and uninterrupted flows of goods and materials. Today, organizations
operate in increasingly complex and uncertain environments with high risks of
supply disruptions making supply management an increasingly Very complex task.
The environmental pressures and risks require
companies to constantly and consequently analyze and reduce these risks. Risk
management should form an integral part of good purchasing and supply
practice. It is essential to address the
right risks and use the right strategies. Thus, organizations should understand
the sources of risk before devising risk mitigation strategies which may
require adding capacity, increasing inventories, having redundant suppliers,
increasing responsiveness, increasing flexibility, aggregating or pooling
demand, increasing capability, or having more customer accounts.
Supply disruptions can be defined as any
unforeseen events that disturb the normal flow of goods and materials in a
supply chain. These disruptions can have major negative consequences for the
management of operations. For example, they can result in production
disruptions and hampered productivity and capacity utilization. In the longer
term supply disruptions can negatively affect the shareholder price and a
company's long-term financial performance.