The Three Risks You Must Quantify: Material, Cost, and Information

The Central Truth of Supply Chain Management

Every supply chain crisis you’ve faced, every margin you’ve lost, every sleepless night—traces back to unquantified risk in one of three areas:

1. Material — Do you have product? Will you have product?
2. Cost — Are you paying fair value? Where is the opportunity?
3. Information — Can you see the truth? Does knowledge persist?

Most organizations manage these with spreadsheets, gut feel, and tribal knowledge. That worked when supply chains were simple. They’re not simple anymore.

The Problem: You Can’t Manage What You Can’t Measure

Material Risk Blindness

You find out about Material risk when you’re already short. The symptoms are familiar:

• Stockouts that catch you off guard
• Expedited freight eating your margins
• Lost customers you couldn’t serve

But the root cause is always the same: you couldn’t see the risk until it was burning.

Cost Risk Invisibility

Your supplier sends a letter: “Due to market conditions, we’re raising prices 8%.”

But did the market really move 8%? Without visibility, you’ll never know. The Producer Price Index might show 3%. That 5% gap is margin you’re giving away—and it compounds quarter after quarter.

Information Risk Fragility

Tribal knowledge lives in people’s heads. When they leave, it leaves. Every time you have turnover, you’re starting over. Every time a crisis hits, you’re rebuilding context from scratch.

What Quantification Actually Looks Like

Quantifying Material Risk

Instead of: “I think we’re okay on chicken.”

You get: “We have 14 days of coverage, supplier capacity is at 87%, and there’s a single-source risk at the marinade supplier who feeds 73% of our protein volume through two different Tier 1 suppliers.”

That’s the difference between guessing and knowing.

Quantifying Cost Risk

Instead of: “Supplier says costs went up due to market conditions.”

You get: “Market moved 3%. You raised prices 8%. The fair value gap on this product is $0.30 per unit, which equals $3M annually at our volume. Let’s talk about that 5%.”

That’s negotiating with data instead of hope.

Quantifying Information Risk

Instead of: Scattered spreadsheets, emails, and knowledge walking out the door.

You get: A single source of truth where institutional knowledge compounds over time. What you learned during the last crisis is still there, connected to current data.

The Cost of Not Quantifying

Every unquantified risk eventually becomes a quantified loss.

• Material Risk you can’t see = Stockouts you can’t prevent
• Cost Risk you can’t see = Margin you’re giving away
• Information Risk you can’t see = Starting over every time

The question isn’t whether you can afford to quantify your risk. It’s whether you can afford not to.

Getting Started

The path forward isn’t complicated:

1. Start with one category — Pick something high-spend and high-volatility
2. Quantify the basics — Risk scores, time-to-runout, fair value gaps
3. See what you’ve been missing — The numbers will tell you where to act
4. Expand from there — Scale what works

Risk you can’t quantify is risk you can’t manage. The first step is making it visible.