13. Understanding the Supply Chain Risk Profile

The procurement organization is responsible for implementing the strategic sourcing initiatives in the supply network and thus faces the greatest challenges for serving the future needs of a rapidly changing world. No other business discipline will play as critical a role in the future of a company throughout the remainder of the twenty-first century.

Managing a supply network would be straightforward except for the uncertainty arising from three major sources: supplier delivery performance, manufacturing reliability, and customer demand. Inventory is used as insurance in this uncertain world. To meet and sustain customer service level objectives, such as stock-outs less than 5 percent of the time, ...

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