Adaptation of the Fine-Kinney method in supply chain risk assessment

Abstract

Competitiveness based on the efficient operation of global supply chains requires a reduction of total logistic costs while maintaining them flexible to market changes and unforeseen events. Therefore, the focus on safety remains a key issue within the study of supply chains. Safety (or lack thereof) has an impact on operating costs, delivery time, inventory volume and the value of insurance rates, which can lead to a decrease of international competitiveness. This makes supply chain safety a competitive advantage, source of added value. The present study aims to expose risk factors assessment using an adaptation of the Fine-Kinney method, in which risks are analysed based on their risk exposure, likelihood and impact severity. This adaptation includes an adjustment on the occurrence scale to consider the general degree of incidence, as well as on the severity scale to consider the number of impacts that each risk involves. A risk map for the processes associated with the chain using the scales considered is also proposed. Risks associated to the supply chain of a chemical company located in Mexico are assessed using this methodology, in order to establish the degree of vulnerability of each process involved, as well as to document the existing processes in the mitigation of risks. In the scope of the analysis, a total of 118 risks were found and classified, spotting 14 with a high-risk level. 18.6% of documented risk mitigation plans were detected, as well as 38.98% of undocumented plans. This is a first effort on identifying the sources of risk and thus, can be useful to prioritize the mitigation approach towards each one, in order to develop over the long term a risk management process at a corporative level.