Chapter $2$ Case Study $$ Risk Management:

Building off last week$$s Case Study: You are the Chief Supply Officer of a publicly traded, bicycle company called $$Vicious Cycle$$ located in Pittsburgh, PA$.$ While your business assembles the bicycle, several of the products needed to make the bicycle come from different suppliers. After emailing Mr$.$ Cycle your opinion on the possible new tire supplier options, he has asked you to consider bringing in the additional supplier in China, while keeping Wheelie Good Tires as well. Fortunately for your business relationship, Wheelie Good Tires sat down with you this morning and explained that they were not going to be able to meet the increase in demand. They can continue to supply the same number of tires at $$5\mathrm{.}00$ but cannot accommodate the huge boom in business that you are having.$$ Since business is doing so well, you have also hired a new employee, Rudy Reindeer, to help with purchasing supplies. He$$s fresh out of college but eager to learn. You sat down with him and explained to him that risks in the supply chain can be classified into three main categories: $(1)$ operational: the risk of interruption of the flow of goods or service, $(2)$ financial: the risk that the price or cost of the goods or services acquired will change significantly, and $(3)$ reputational risk. All three risks affect the survival, competitiveness, and bottom line of your company. The workday ended and Rudy left to go home. While you were sitting in your office, you started thinking about risk$-$management strategies and how they should apply to your new supplier in China. You wanted to write down your thoughts and forward them along to Rudy so he could read them in the morning.

Explain to Rudy what things you are considering while entering into business with this new supplier in China.$$ Break it down into the three risks listed above and be specific. The best way to alleviate risks is to identify them in advance.