Performance Measurement and Ranking Organization’s Suppliers Based on Risk Factors Using a Hybrid Approach of FMEA and Multi-Criteria Decision Making Techniques: A Case Study

Abstract

Risk occurance in the supply chain is unavoidable. Basically, a great portion of these risks comes from suppliers. Timely identification of the risks and using appropriate preventive actions to reduce the probability and impact of their occurrence play a significant role in increasing organizational efficiency, improving product quality and satisfying customers. Developing a systematic and efficient mechanism is a prerequisite for properly identifying and assessing the supply chain risks and making correct decision. Failure Modes and Effects Analysis (FMEA) is a known engineering technique and risk assessment tool to define, identify, and eliminate potential failures and errors in the products, processes, projects, and services. In this paper, FMEA approach is combined with multi-criteria decision-making techniques to make a systematic mechanism for assessing supply chain risks and prioritizing candidate flour suppliers in Sahar bread industrial group. In the proposed model, Analytic Hierarchy Process (AHP) is used to determine the risk’s weights and VIKOR method is applied for assessing and ranking the suppliers. Results shew that among the identified risks, “cost risk group” with the weight "0.43" is the most important. Therefor the company officials have to adopt appropriate policies, carefully, to deal with this risk. Moreover, final evaluation of flour suppliers in the company indicates that according to all criteria, the fourth supplier achieves the highest priority and it is selected as the most qualified flour supplier for the company.