12. Supply Risk, Resilience and Global SourcingIntroduction and ContextGlobal sourcing has transformed procurement from a transactional purchasing activity into a strategic discipline concerned with market access, cost competitiveness, innovation, capacity, and continuity. Organisations source materials, components, services, and technology across borders because international supply markets may offer lower total cost, specialised capabilities, access to scarce resources, or proximity to important customers. Yet the same networks that create advantage can also transmit disruption across countries, suppliers, transport modes, currencies, and regulatory systems. A factory shutdown caused by a natural disaster may interrupt production thousands of kilometres away. A geopolitical dispute may restrict access to a critical mineral. A financially weak supplier may continue accepting orders while quietly reducing maintenance and quality expenditure. A cyberattack on a logistics provider may prevent shipment visibility and delay customs documentation. These events demonstrate that supply risk is not limited to supplier failure. It arises from the interaction of external uncertainty, network structure, organisational decisions, and the speed with which an enterprise can detect and respond to disturbance. Supply resilience is therefore more than holding additional inventory. It is the capability of a supply network to anticipate disruption, absorb its effects, recover acceptable performance, and adapt so that future vulnerability is reduced. Global sourcing decisions must balance efficiency and resilience rather than treating them as mutually exclusive objectives. The appropriate decision may involve dual sourcing, regionalisation, supplier development, postponement, strategic inventory, contractual safeguards, digital monitoring, or redesign of the product itself. This chapter examines the principal forms of supply risk and the analytical tools used to manage them. It also considers global sourcing choices, resilience metrics, continuity planning, technology, governance, and the managerial trade-offs involved in designing robust supply networks. Learning ObjectivesAfter studying this chapter, students should be able to: 1. Explain supply risk, vulnerability, resilience, robustness, agility, and recoverability. 2. Classify geopolitical, operational, financial, quality, cyber, logistics, environmental, and concentration risks. 3. Map supply networks beyond the immediate supplier tier and identify critical dependencies. 4. Apply scenario analysis, failure mode and effects analysis, stress testing, and business continuity planning. 5. Evaluate dual sourcing, localisation, regionalisation, buffer inventory, and supplier-development strategies. 6. Interpret resilience metrics and distinguish them from conventional cost and service measures. 7. Assess the governance, ethical, regulatory, technological, and managerial implications of global sourcing. 8. Formulate a balanced sourcing and resilience strategy for a complex supply network. The Nature of Supply RiskSupply risk is the possibility that an event or condition will adversely affect an organisation’s ability to obtain required inputs at the expected time, cost, quantity, quality, or specification. Risk is often represented as a combination of probability and impact, but this formulation is incomplete for interconnected supply networks. A low-probability event can create severe consequences when a product has no substitute, when inventories are minimal, or when recovery requires regulatory approval. Several related concepts should be distinguished. A hazard is a potential source of harm, such as flooding, fraud, or a ransomware attack. Exposure describes the extent to which the organisation is connected to that hazard. Vulnerability is the susceptibility of the network to disruption. Consequence is the operational, financial, legal, reputational, or social effect if disruption occurs. Resilience is the capacity to prepare for, respond to, recover from, and learn from disruption. Robustness refers to the ability to continue operating without significant change under adverse conditions, whereas agility refers to the speed with which resources and decisions can be reconfigured. Risk is also different from uncertainty. Under risk, relevant outcomes and approximate probabilities may be estimated. Under uncertainty, the range of possible outcomes or their probabilities is unclear. Strategic sourcing decisions frequently involve both. Historical data may support estimates of transport delay, while the consequences of a new trade restriction may be difficult to quantify. Principal Categories of Supply RiskGeopolitical and country risk includes trade sanctions, tariffs, export controls, political instability, civil conflict, corruption, expropriation, abrupt policy change, and restrictions on foreign exchange or capital movement. Country risk can affect both physical supply and the legality of a transaction. A supplier may remain technically capable but become inaccessible because of sanctions or a change in customs rules. Operational risk arises from inadequate capacity, equipment failure, labour shortages, poor maintenance, weak process control, inaccurate forecasts, or ineffective production planning. Operational risk is often amplified when a supplier operates close to full capacity and has limited ability to absorb demand variability. Financial risk concerns insolvency, liquidity pressure, excessive debt, currency volatility, commodity-price exposure, and dependence on a small number of customers. A supplier’s reported profit does not necessarily indicate financial resilience; cash-flow weakness may be more relevant to continuity. Quality and product-safety risk includes defective inputs, process drift, counterfeit materials, contamination, nonconformance, traceability failure, and inability to meet changing technical or regulatory requirements. Quality risk can create recalls, liability, reputational damage, and harm to customers. Logistics and infrastructure risk includes port congestion, carrier failure, transport damage, customs delay, route closure, inadequate warehousing, fuel-price volatility, and dependence on a single transport corridor. International transport introduces additional handoffs and documentation requirements, each of which may create delay or error. Cyber and information risk includes ransomware, data theft, operational-technology compromise, manipulation of supplier master data, unauthorised access to product designs, and disruption of digital platforms. Cyber risk is especially significant because a supplier, carrier, or software provider can serve as an entry point into the wider network. Environmental and social risk includes floods, droughts, earthquakes, extreme heat, water scarcity, labour-rights violations, unsafe working conditions, forced labour, and community conflict. These risks may affect continuity directly and may also expose the buying organisation to legal and reputational consequences. Concentration risk occurs when too much supply depends on one supplier, site, country, region, technology, material, port, or transport mode. A network may appear to have several suppliers but remain concentrated if all of them depend on the same sub-tier producer or geographic cluster. Concentration risk is therefore a network property, not merely a supplier-count problem. From Supplier Lists to Supply-Network VisibilityTraditional procurement records commonly identify the contracted supplier, price, delivery terms, and performance history. Resilience analysis requires a broader map: supplier sites, sub-tier dependencies, raw materials, tooling, logistics routes, digital connections, substitution possibilities, and recovery times. The objective is not to document every relationship with equal detail. It is to identify nodes and links whose failure could materially affect the organisation. A practical mapping exercise begins with critical products or services and works upstream. For each input, the organisation should identify the immediate supplier, manufacturing location, key sub-suppliers, country of origin, transport route, lead time, minimum order quantity, tooling ownership, approved alternatives, and regulatory constraints. It should also record whether the supplier’s sites are independent or share common utilities, labour markets, raw materials, or logistics infrastructure. A network map becomes more useful when combined with criticality criteria. A component may be inexpensive but highly critical because it is safety-related, difficult to qualify, or required for every finished unit. Conversely, an expensive item may be relatively low risk if multiple qualified suppliers can deliver it quickly. Criticality should therefore consider financial value, substitutability, time to recover, customer impact, regulatory significance, and interdependence. Useful outputs include a tiered supplier map, a geographic heat map, a dependency matrix, and a critical-item register. Organisations should distinguish between known information, supplier declarations, independently verified information, and assumptions. A map that appears precise but relies on unverified tier-two data can create false confidence. Frameworks for Analysing Supply RiskRisk registers and heat mapsA risk register records the risk description, causes, affected processes, probability, impact, existing controls, risk owner, early-warning indicators, and planned response. Heat maps provide a visual prioritisation, but they should not replace judgement. Risk scores can be misleading when probability and impact scales are subjective or when several risks interact. A high-impact, low-probability risk may deserve urgent treatment if its recovery time exceeds the organisation’s tolerance. Failure Mode and Effects AnalysisFailure Mode and Effects Analysis (FMEA) examines how a process, product, or supplier may fail. For each failure mode, the team considers its effects, causes, existing controls, severity, occurrence, and detectability. Traditional FMEA may calculate a Risk Priority Number by multiplying ratings for severity, occurrence, and detectability. However, the number should not be treated as an objective probability. A failure with very high severity should not be ignored merely because its occurrence score is low. In procurement, FMEA can be applied to a supply process. For example, a sole-source electronic component may fail because the supplier’s test equipment is unavailable. The effect could be a production stoppage; existing controls may include preventive maintenance and safety stock; further actions may include a second qualified source or redesign. FMEA is most valuable when it leads to concrete controls and assigned accountability. Scenario analysisScenario analysis explores plausible combinations of events rather than predicting one future. Scenarios might include a sudden export restriction, a prolonged port closure, simultaneous supplier insolvency and demand surge, a major cyber incident, or a climate-related site interruption. Each scenario should specify assumptions, affected nodes, duration, dependencies, operational consequences, financial exposure, and decision triggers. Good scenarios are challenging but plausible. They should test whether the organisation can obtain information, make decisions, access cash, secure transport, communicate with customers, and maintain essential operations. Scenario analysis is particularly useful where historical data are limited. Stress testingStress testing evaluates performance under defined adverse conditions. A procurement team may test what happens if lead time doubles, available capacity falls by 40 per cent, a currency depreciates sharply, or a critical supplier is unavailable for twelve weeks. The analysis can be deterministic or probabilistic. It should identify the point at which service, cash flow, production, or regulatory compliance falls below an acceptable threshold. Stress testing is more informative when it includes second-order effects. A supplier interruption may cause spot-market purchasing, which increases cost; expedited transport may then reduce cash availability; a substitute material may require new quality approval. These interactions often determine the real impact of disruption. Business continuity and recovery planningBusiness continuity planning defines how critical activities will continue during disruption. A continuity plan should identify essential products and processes, maximum tolerable downtime, recovery time objectives, recovery point objectives for information, alternate facilities, emergency contacts, decision rights, communication protocols, and required resources. The plan must be operational rather than merely documentary. It should specify who can approve an alternate supplier, release emergency inventory, change a transport mode, notify regulators, or prioritise customers. Exercises and simulations are necessary because untested plans commonly contain outdated contacts, unrealistic recovery assumptions, or unresolved authority conflicts. Global Sourcing Choices and Resilience Trade-offsGlobal sourcing can reduce purchase cost and provide access to specialised capabilities, but a narrow cost comparison may exclude inventory, transport, tariffs, quality inspection, working capital, currency, disruption, and compliance costs. Total cost of ownership should therefore include both normal operating cost and the expected cost of adverse events where meaningful estimates are available. Single sourcing may support close collaboration, volume leverage, innovation, and consistent quality. It also creates dependence and weakens bargaining power if switching is difficult. Single sourcing is not automatically irresponsible; it may be appropriate when a supplier has unique capability and robust contingency arrangements exist. Dual or multiple sourcing reduces dependence and may improve continuity, but it can increase qualification, tooling, coordination, and unit costs. A nominal second source is not an effective mitigation if it has no available capacity, uses the same sub-tier supplier, or requires a lengthy approval process. Sourcing shares should reflect capacity, qualification status, lead times, and the strategic importance of the item. Localisation and regionalisation shorten transport distances, reduce exposure to some geopolitical risks, and may improve responsiveness. They can also increase labour and facility costs, create new concentration in a region, and fail to address dependence on globally sourced raw materials or technology. Reshoring should therefore be assessed at network level rather than assumed to eliminate risk. Strategic inventory provides time to recover, but inventory is costly, can become obsolete, and may not protect against quality, regulatory, or cyber failures. The correct question is not whether inventory is high or low, but whether its level corresponds to demand variability, recovery time, supply lead time, and criticality. Postponement and modular design delay final configuration until demand or supply conditions are clearer. Standardised interfaces and interchangeable components can increase substitution options. Design-for-resilience may involve reducing unique parts, approving equivalent materials, maintaining transferable tooling, and documenting process specifications. Supplier development addresses underlying capability rather than merely shifting orders. It may include process improvement, training, financial support, joint forecasting, technology transfer, quality-system development, or collaborative capacity planning. Supplier development is particularly valuable where switching costs are high or strategic capability is scarce. Measuring ResilienceTraditional procurement metrics such as purchase-price variance, savings, supplier on-time delivery, and defect rate remain necessary but are insufficient. Resilience metrics should capture exposure, preparedness, response, and recovery. Important measures include: - time to detect a disruption;
- time to respond and time to recover;
- percentage of critical spend with an approved alternative;
- percentage of critical suppliers with tested continuity plans;
- proportion of supply dependent on one site, country, or sub-tier source;
- days of supply available for critical inputs;
- capacity recovery rate after disruption;
- fill rate during a disruption;
- revenue or contribution margin at risk;
- recovery-cost variance; and
- supplier financial, cyber, quality, and environmental assessment coverage.
Time to recover is often more informative than the existence of a backup supplier. A supplier may be approved but unable to deliver for six months because tooling, validation, or regulatory approval is missing. Metrics should also be segmented by critical category; an average resilience score can hide severe vulnerability in a single safety-critical item. A useful managerial dashboard combines leading and lagging indicators. Leading indicators include deteriorating cash flow, abnormal lead-time variation, increased customer complaints, cyber-control gaps, insurance changes, staff turnover, and delayed capital expenditure. Lagging indicators include missed deliveries, line stoppages, emergency freight, and customer loss. The purpose of the dashboard is not surveillance for its own sake but earlier intervention. An Illustrative Case: The Vulnerable Power-Management ComponentBackgroundThe following fictional case concerns Orion Mobility Systems, a manufacturer of industrial vehicles. Orion purchased a specialised power-management module from one approved supplier, Delta Circuits, whose production site was located in a coastal industrial zone. The component represented only a small proportion of the vehicle’s purchase cost but was installed in every unit. Situation and problemDelta Circuits reported strong delivery performance and competitive pricing. However, Orion’s procurement team discovered that Delta relied on one semiconductor package from a sub-tier producer and used specialised test equipment available at only one site. The component could not be replaced without engineering validation. Orion held ten days of inventory, while the normal replenishment lead time was six weeks. A scenario exercise examined a severe coastal storm followed by a prolonged power outage. The analysis showed that Delta could be unable to ship for eight weeks, while the sub-tier producer would require additional time to restore supply. The initial supplier scorecard had not identified the exposure because it measured Delta’s performance but not the sub-tier network. AnalysisThe team assessed the component using a risk register, FMEA, and stress test. Severity was high because production of all vehicle models would be affected. Occurrence was moderate, but detectability was poor because Orion had no direct visibility of sub-tier inventory or equipment redundancy. Concentration analysis showed that a nominally global supply chain was dependent on one production site, one package design, one test platform, and one transport corridor. Financial analysis compared four options: increasing inventory, qualifying a second supplier, redesigning the module, and relocating final assembly. The analysis showed that relocation would not address the semiconductor dependency. A second source would take nine months to qualify, while a redesign would take longer but could eliminate the specialised package. Approach and solutionOrion adopted a layered strategy. In the short term, it increased safety stock and required Delta to maintain tested business-continuity procedures. It also negotiated visibility of sub-tier capacity and introduced early-warning reporting for equipment failure, labour disruption, and material shortages. In the medium term, Orion funded part of the qualification effort for a second supplier in another region. The second supplier used a different sub-tier source and an alternative test platform. Orion also approved a limited redesign using a more standardised interface. Tooling ownership and documentation rights were revised so that production could be transferred if necessary. The organisation did not abandon Delta. Instead, it established a joint resilience programme involving engineering, quality, procurement, finance, information security, and logistics. The supplier contract included continuity obligations, audit rights proportionate to risk, notification requirements, data-protection provisions, and recovery expectations. OutcomeThe programme increased normal operating cost through qualification and inventory expenditure. However, it reduced time to recover, improved visibility beyond tier one, and created a credible alternative rather than a nominal backup. The redesign also improved future substitution. Orion’s management concluded that the appropriate objective was not the lowest purchase price but an acceptable total cost under both normal and stressed conditions. Learning pointsThe case illustrates five principles. First, criticality is not determined by purchase price. Second, supplier performance history does not reveal all network dependencies. Third, resilience usually requires several coordinated measures rather than one solution. Fourth, design decisions can be as important as procurement decisions. Fifth, continuity must be tested, governed, and connected to engineering, finance, logistics, and information security. Governance, Ethics, and Professional ResponsibilitySupply resilience decisions involve distributional and ethical choices. Holding scarce capacity for one customer may disadvantage another. Localisation may protect domestic employment but increase cost for consumers. Emergency substitution may expose workers or communities to unsafe conditions if due diligence is weakened. Cost pressure must not justify forced labour, unsafe facilities, bribery, environmental damage, or concealment of defects. Contracts should define responsibilities for continuity, quality, cybersecurity, intellectual property, data protection, subcontracting, audit access, notification, and recovery support. Nevertheless, contractual language cannot substitute for capability or trust. Excessive audit demands may burden smaller suppliers without improving risk control, while inadequate transparency may prevent effective response. Organisations should establish risk appetite and escalation thresholds. The board or executive leadership should understand critical dependencies, not merely aggregate procurement savings. Procurement professionals must also manage conflicts of interest in emergency buying, document exceptions, and preserve fair competition where time permits. Digital Tools, Analytics, and Artificial IntelligenceDigital supply-network platforms can combine enterprise-resource-planning data, supplier declarations, shipment visibility, financial information, weather alerts, sanctions data, and external event feeds. Network graphs help reveal common sub-tier dependencies and geographic concentration. Control towers can support exception management, but their value depends on data quality and clear decision rights. Predictive analytics may identify unusual lead-time changes, declining order fulfilment, payment stress, quality drift, or abnormal cyber activity. Machine-learning models can support early warning, but they should not be treated as independent decision-makers. Historical data may omit unprecedented events, contain supplier-reporting bias, or generate false alarms. Human review, model validation, access controls, and explainability are essential. Cyber resilience requires multifactor authentication, least-privilege access, network segmentation, secure backups, supplier security requirements, incident-response exercises, and verification of payment or master-data changes. Digital integration increases visibility but also expands the attack surface. A resilient digital network therefore balances connectivity with controlled access and recovery capability. Current Developments and Emerging TrendsSeveral developments are reshaping global sourcing. Geopolitical competition is encouraging organisations to examine country exposure, strategic materials, export controls, and industrial policy. Climate volatility is shifting attention from historical averages to forward-looking physical-risk assessments. Regulatory expectations increasingly require traceability, responsible sourcing, supply-chain due diligence, and evidence of environmental and labour practices. Regional supply ecosystems are growing in importance, but complete self-sufficiency is rarely practical. The emerging approach is selective regionalisation: critical stages may be duplicated across regions while global sourcing is retained for standardised or abundant inputs. Digital product passports, supplier collaboration platforms, real-time logistics data, and scenario-based digital twins may improve traceability and response. Circular procurement can also support resilience by reducing dependence on virgin materials through repair, remanufacturing, recycling, and recovery. However, circular flows require quality standards, reverse logistics, material identification, and reliable secondary markets. Resilience strategies must therefore consider not only the forward supply chain but also recovery and reuse systems. Best-Practice PrinciplesEffective supply-risk management generally follows these principles: 1. Map critical networks beyond the immediate supplier tier. 2. Assess criticality using consequence, substitutability, recovery time, and regulatory importance. 3. Combine preventive controls with recovery capability. 4. Avoid treating supplier count as a sufficient measure of diversification. 5. Use scenario analysis and stress testing to challenge normal assumptions. 6. Qualify alternatives before disruption occurs. 7. Integrate procurement with engineering, finance, quality, logistics, cybersecurity, and sustainability. 8. Measure time to recover, not only routine delivery performance. 9. Verify supplier information and distinguish facts from assumptions. 10. Test continuity plans and update them after exercises or incidents. 11. Use contracts to support, not replace, collaborative risk management. 12. Protect ethical, legal, labour, environmental, and data standards during emergencies. Chapter SummaryGlobal sourcing creates access to cost, capability, innovation, and markets, but it also creates exposure to geopolitical, operational, financial, quality, logistics, cyber, environmental, social, and concentration risks. Effective management begins with network visibility and criticality analysis rather than reliance on tier-one supplier scorecards. Risk registers, FMEA, scenario analysis, stress testing, and continuity planning provide complementary ways to understand failure and prepare responses. Resilience may be developed through dual sourcing, regionalisation, strategic inventory, postponement, modular design, supplier development, digital visibility, and tested recovery arrangements. No single measure is universally superior. Decisions must balance total cost, service, recovery time, regulatory requirements, ethical obligations, and strategic importance. Resilience metrics such as time to detect, time to recover, alternative-source coverage, and concentration exposure supplement traditional procurement measures. Ultimately, resilient global sourcing is an enterprise capability requiring cross-functional governance, responsible supplier relationships, reliable information, and continual learning. Key TermsSupply risk: The possibility that supply conditions will adversely affect cost, quality, quantity, timing, or continuity. Supply resilience: The capability to prepare for, absorb, recover from, and adapt after disruption. Robustness: The ability to maintain performance under adverse conditions without major change. Agility: The speed with which resources, processes, or decisions can be reconfigured. Vulnerability: The susceptibility of a supply network to harmful disruption. Concentration risk: Exposure created by dependence on one supplier, site, country, technology, or route. Geopolitical risk: Supply exposure arising from political conflict, sanctions, trade controls, or policy change. Sub-tier supplier: A supplier positioned below the immediate contracted supplier in the supply network. FMEA: A structured method for analysing failure modes, causes, effects, and controls. Scenario analysis: Examination of plausible combinations of events and their consequences. Stress testing: Evaluation of network performance under specified adverse assumptions. Business continuity plan: A documented and tested arrangement for maintaining critical activities during disruption. Time to recover: The time required to restore an acceptable level of supply or operational performance. Dual sourcing: Procuring an input from two qualified suppliers to reduce dependence. Localisation: Moving or developing supply activity closer to the consuming market or operation. Total cost of ownership: The full cost of acquisition, operation, risk, logistics, quality, and disposal over the relevant life cycle. Postponement: Delaying final configuration or commitment until demand or supply information improves. Early-warning indicator: A signal suggesting that supplier or network conditions may be deteriorating. Supply-network visibility: Knowledge of suppliers, sites, materials, routes, dependencies, and controls across relevant tiers. Cyber resilience: The ability of digital supply systems to withstand, respond to, and recover from cyber disruption. Review QuestionsShort Answer Questions1. Distinguish supply risk from supply resilience. 2. Why can a low-cost component still be highly critical? 3. What is concentration risk in a supply network? 4. State two limitations of a traditional supplier scorecard. 5. What is the purpose of a recovery time objective? Long Answer Questions1. Explain the major categories of supply risk and show how they may interact. 2. Describe how an organisation can map and assess risks beyond its immediate suppliers. 3. Compare single sourcing, dual sourcing, localisation, and strategic inventory as resilience strategies. 4. Explain how FMEA, scenario analysis, and stress testing support supply-risk decisions. 5. Discuss the governance, ethical, and contractual issues involved in global sourcing resilience. Analytical / Application Questions1. A manufacturer depends on one overseas supplier for a low-value safety-critical component. Develop a risk-assessment approach and recommend a layered resilience strategy. 2. A firm has two approved suppliers, but both obtain the same raw material from one sub-tier producer. Analyse the actual concentration risk and propose measures to reduce it. 3. Design a resilience dashboard for a global procurement function, including leading indicators, recovery measures, and management decision triggers. 22. Multiple Choice Questions with AnswersQuestion 1Which characteristic most clearly distinguishes resilience from robustness? A. Resilience focuses only on reducing purchase price B. Resilience includes response, recovery, and adaptation after disruption C. Resilience requires eliminating all suppliers except one D. Resilience measures only routine supplier delivery performance Correct Answer: B. Resilience includes response, recovery, and adaptation after disruption Question 2Why may a supplier-count measure give a misleading impression of diversification? A. Suppliers always operate in different countries B. Multiple suppliers may depend on the same sub-tier source or location C. Supplier count directly measures recovery time D. More suppliers always create greater concentration Correct Answer: B. Multiple suppliers may depend on the same sub-tier source or location Question 3Which information is most important when assessing a critical component’s recoverability? A. The supplier’s catalogue size B. The buyer’s historical purchase-price variance C. The time required to qualify and activate an alternative source D. The supplier’s marketing expenditure Correct Answer: C. The time required to qualify and activate an alternative source Question 4What is the principal purpose of FMEA in supply-risk management? A. To calculate annual procurement savings only B. To identify failure modes, their effects, causes, and controls C. To replace all supplier audits with automated scoring D. To determine the lowest-cost country for sourcing Correct Answer: B. To identify failure modes, their effects, causes, and controls Question 5A stress test assumes that a critical supplier’s lead time doubles and available capacity falls by 40 percent. What does this primarily evaluate? A. Network performance under adverse conditions B. Supplier brand reputation C. The legal ownership of tooling D. Routine invoice-processing efficiency Correct Answer: A. Network performance under adverse conditions Question 6Which strategy is most likely to reduce dependence on a specialised single-site supplier over the medium term? A. Reducing visibility of sub-tier suppliers B. Qualifying an independent second source and standardising the design where feasible C. Increasing reliance on the same transport corridor D. Removing all continuity requirements from the contract Correct Answer: B. Qualifying an independent second source and standardising the design where feasible Question 7Why is strategic inventory not a complete resilience solution? A. Inventory cannot provide any protection against delays B. Inventory may become obsolete and does not solve quality, regulatory, or cyber failures C. Inventory always increases supplier concentration D. Inventory eliminates the need for supplier qualification Correct Answer: B. Inventory may become obsolete and does not solve quality, regulatory, or cyber failures Question 8Which is a leading indicator of possible supplier deterioration? A. A completed production stoppage B. A confirmed customer recall C. Increasing lead-time variation and signs of cash-flow stress D. A historical purchase order issued two years earlier Correct Answer: C. Increasing lead-time variation and signs of cash-flow stress Question 9In the illustrative case, why did relocating final assembly fail to address the main vulnerability? A. The problem was dependence on a semiconductor and specialised test platform B. Final assembly was the only process affected by weather C. Relocation always increases quality risk D. The supplier had no contractual relationship with the buyer Correct Answer: A. The problem was dependence on a semiconductor and specialised test platform Question 10Which principle best reflects responsible use of artificial intelligence in supply-risk monitoring? A. Allow the model to make all emergency decisions without review B. Ignore data quality because large datasets guarantee accuracy C. Combine analytics with validation, human judgement, access controls, and explainability D. Use only historical data and reject all external signals Correct Answer: C. Combine analytics with validation, human judgement, access controls, and explainability
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