MANAGING SUPPLY CHAIN RISKS: A FUZZY-FAILURE MODE AND EVALUATION APPROACH FOR RANKING THREATS

Abstract

On the backdrop of lower transportation cost, outsourcing paved the way for borderless production activities and ushered in the era of Supply Chain Management (SCM). For many organizations, achieving the goals of their Supply Chain (SC) is constantly threatened by increased competition and disruption. In this study, the aim is to identify, and rank, SC threats in a developing country using Failure Mode and Effects Analysis (FMEA) with Fuzzy Logic (FL). FMEA parameters were derived for 44 supply chain threats (SCT1 – SCT44) and their Risk Priority Number (RPN) determined. Subsequently, the Mamdani Fuzzy Inference system was utilized to arrive at a Fuzzy-RPN with 125 rules using severity as a determining factor. The rules were ranked to prioritize SC threats. From the conventional FMEA, demand variation (SCT42) and long-distance sourcing (SCT27) had the highest and lowest RPN, respectively. After fuzzification and defuzzification, Fuzzy-RPN identified raw material delay (SCT1), government policy (SCT11), poor transport infrastructure (SCT18) and political instability (SCT19) as threats with the highest Fuzzy-RPN (210) and product recalls (SCT28) with the lowest Fuzzy-RPN (99). Based on these results, it is concluded that a Fuzzy-FMEA approach can identify and rank SC threats with the use of an RPN devoid of sentiments and inaccuracies.