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Why do companies need contingency plans for their supply chains?
ABecause suppliers must be paid in advance by law
BBecause a blizzard or a drought can cut off supply
CBecause inventory records must be audited yearly
DBecause customers change their address frequently
Answer & Solution
Correct answer: B. Because a blizzard or a drought can cut off supply
1. A supply chain can be broken by events entirely outside the firm's control.
2. A blizzard that closes an airport can stop cargo planes from landing.
3. A drought that causes crop failures can remove an agricultural input altogether.
4. By thinking ahead about an alternative source of supply, companies can avert major losses.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 10 "Achieving World-Class Operations Management", section Keeping the Goods Flowing: Supply-Chain Management_
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