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Annex C
(Informative)
C. Examples of Risks by Category and Type
This annex provides a list of some examples of risk and sources of uncertainty.
EXTERNAL, END TO END SUPPY CHAIN RISKS
Natural Disasters
- Epidemics
- Tsunamis
- Earthquakes
- Volcanoes
- Weather disasters (hurricanes, tornados, storms, blizzards, floods, droughts)
Accidents
- Fires
- Structural failures
- Explosions
- Hazardous spills
Sabotage, Terrorism, Crime, and War
- Cyber attacks
- Bombings
- Product tampering
- Biological and chemical weapons
- Intellectual property theft
- Blockades
- Physical theft, tampering, and destruction of property
- Fraud, graft, bribery, corruption, and counterfeiting
- Kidnapping and hostage taking
- Industrial espionage
Government Compliance and Political Uncertainty
- Taxes, customs, and other regulations
- Political stalemate
- Compliance issues
- Regulatory financial reporting (e.g., Sarbanes-Oxley)
- Operations
- Logistics/trade
- Trade restrictions (e.g., Buy American Act)
- Regulatory audit history
- Regulatory approvals - marketing approvals
- Public health
- Environmental
- Currency fluctuations
- Corruption
- Political unrest
- Transparency
- Boycotts
Labor Unavailability and Shortage of Skills
- Availability
- Cost unrest
- Quality
- Strikes and slowdowns
Industry-wide (i.e., Market) Challenges
- Capacity constraints
- Process patents
- Unstable prices
- Shrinking industry
- Lack of competition
- Low supplier profitability
- Entry barriers
- Certification
- Capital requirements
- Cost trends
- Specific assets
- Recessions/inflation
- Design patents
- Language and cultural differences
Lawsuits
- Environmental
- Health and safety
- Intellectual property
Technological Trends
- Emerging technologies (pace/direction)
- Obsolescence
- Other technological uncertainty
SUPPLIER RISKS: EXTERNAL, CONTRACT MANUFACTURERS, OR INTERNAL BUSINESS UNIT
Physical and Regulatory Risks
- Key suppliers located in high risk areas
- Material unavailability/poor planning
- Raw materials
- Other materials
- Legal Noncompliance/ethical practices
- Labor practices
- Safety practices & performance
- Environmental practices
- History & outcomes of lawsuits
- Tax practices
- Regulatory noncompliance
- Customs/trade
- Security clearance requirements
- History & outcomes of regulatory audits
- Regulatory certification requirements (e.g., Food & Drug Administration, Federal Aviation Administration)
- Critical disclosure – International Traffic & Arms Regulations
Production Problems
- Capacity
- Too little, too much, or diminishing
- Order and shipping times
- Out of stock (i.e., no/low inventory)
- Performance history, equipment age & downtime (manufacturing & testing equipment)
- Repair cycle time
- Poor quality
- Defects/contamination in manufactured product
- Mislabeling of items
- Lack of training or knowledge
- Inflexible production capabilities (long setup times)
- Lead times
- Backlogs
- Unresponsive
- Unreliable
- Variable
- Technological inadequacies or failures
- Incompatible information systems
- Slow adoption of new technology
Financial losses and premiums
- Degree of competition/profitability
- Downstream integration or too much competition
- Little/no competition - sole source
- Mergers & acquisitions
- Financial viability
- Inability to sustain in a downturn
- Bankruptcy
- Withdrawal from the market
Management Risks
- Inadequate risk management planning
- Lack of business continuity plans
- Lack of requirements for supplier's supplier business continuity plans
- Management quality
- High turnover
- Dishonesty
- Poor labor relations
- Poor metric scorecards
- Substituting inferior or illegal materials/parts
- Failing to perform required treatments/tests
- Submitting inaccurate/false invoices
- Poor communication
- Internal
- External
- Transparency of data & operations
- Lack of continuous improvement
- Unwillingness
- Cost escalation
- Opaque processes
- Opportunistic behavior
- Inflation of purchase costs
- Upstream (i.e., subcontractors and their subcontractors) supply risks
- Any of the above external/supplier risks
- Lack of visibility into subcontractors
- No or poor relationships with subcontractors
- Diminishing sources of supply
- Transition “costs” for new suppliers
- Dependence on one or a few customer(s)
DISTRIBUTION RISKS/DISRUPTIONS: INBOUNDS OR OUTBOUND
- Infrastructure unavailability
- Roads
- Rails
- Ports
- Air capacity/availability
- Labor unrest/unavailability
- Truck drivers
- Rail operators
- Longshoremen
- Pilots
- Assets - lack of capacity or accidents
- Containers
- Trucks
- Rail cars
- Ships
- Airplanes
- Cargo damage/theft/tampering
- Physical damage
- Theft and other security problems
- Tracking the damage
- Environmental controls (e.g., temperature, humidity)
- Warehouse inadequacies
- Lack of capacity
- Inaccessibility
- Damage environmental controls (e.g., temperature, humidity)
- Lack of security
- Long, multi-party supply pipelines
- Increased chance of all problems above
- Longer lead time
- IT system inadequacies/failures
INTERNAL, ENTERPRISE RISKS
Operational risk
- Loss of inventory (damage, obsolescence)
- Environmental performance to permits/other
- Equipment loss, mechanical failures
- Poor Quality
- Defects in manufactured product
- Failure to maintain equipment
- Lack of training or knowledge
- Process issues
- Process reliability
- Process robustness
- Lead time variability
- Inflexible production capabilities (long set up times, etc.)
- Capacity
- Too little, too much, or diminishing
- Order and shipping times
- Out of stock (i.e., no/low inventory)
- Performance history, equipment age & downtime (manufacturing & testing equipment)
- Repair cycle time
- Theft, product diversion, and sabotage
- Fraud, IP theft, and industrial espionage
Government Compliance and Political Uncertainty
- Taxes, customs, and other regulations
- Political unrest
- Currency fluctuations
- Boycotts
Demand Variability/Volatility
- Drawdown of the stockpile
- Surges exceed production, repair, or distribution
- Exceeding maintenance replacement rate
- Shortfalls
- Shelf life expiration
Personnel Availability/Skills Shortfalls
- Sufficient number
- Union contract expiration
- Sufficient knowledge, skills, experience
- High turnover rate
Design Uncertainty
- Changes to requirements
- Reliability estimates of components
- Lack of technical detail
- Access to technical data
- Lack of verification of product
- Failure to meet design milestones
- Changes to product configuration
- Poor specifications
- Design for supply chain (e.g., obsolescence, standardization, and commonality)
Planning Failures
- Forecast reliability/schedule availability
- Acquisition strategy
- Planning data accuracy
- Manufacturability of a design
- Global visibility of plans & inventory positions
- Program maturity
- Competition/bid process
- Subcontracting agreements
Financial Uncertainty/Losses
- Funding availability
- Knowledge of supplier costs
- Work scope/plan creep
- Strategic risk
Facility Unavailability/Unreliability/ Capacity
- Facility breakdown
- Sites located in high risk areas
- Mechanical failures
- Adequate capacity
Testing Unavailability/Inferiority/Capacity
- Unreliable test equipment
- Integration testing
- Operational test qualifications
- Transition from first test to mass production
- Operational test schedule
Enterprise Underperformance/Lack of Value
- Customer satisfaction/loyalty
- Uniqueness
- Liability
- Substitutability
- Cost/profit
- Systems integration
- Customer demand
- Other application/product value
Supplier Relationship Management (SRM) Use
- Contract/supplier management availability and expertise
- Supplier development and continuous improvement
- In-house SRM expertise
- Supplier communications - (EDI web, real time demand, plans, forecasts, technology roadmaps)
- Lack of internal and external communication/coordination
Next: Annex D
