Site Loader
Rock Street, San Francisco

In
this case study I am trying to find out an answer for the question: what are
the tools for professionals to measure supply chain performance?

This
essay will start with a short history which will tell how the supply chain grew
with the help of technical developments on transportation and communication. Then
it will make a briefly introduction about the supply chain risk. After that
this essay will narrow down the map to supply risk assessment section, and discuss
about three tools for professionals to measure supply chain performance.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

History
of Supply Chain

Comparing
with the long history of commercial business, the emerge of supply chain is relatively
more recent. In the article of A Brief History of Supply Chain, Sanyal (2012) indicated that because of the
behindhand technology and high cost, in ancient times people didn’t ship and
change goods to places that are with long distances. Productions and
consumptions happened in doorways. Along with the development of seamanship
technology, in the 18th century, large-scale goods were able to be
transported internationally. Later in the late 18th century the
Industrial Revolution has improved the world-wide shipping significantly. Some
industrial centers began to emerge and send their products all over the world.
Steamships, which were introduced by the mid-19th century, played an
essential role on the establishment of the global supply network. Steamships
and steam trains not only helped the improvement of transportation, but also
accelerated the speed of communication. However, methods of communication were
still underdeveloped at that time. Although telegraphs had been invented, the
establishment of industrial structure and supply network was still strongly
restricted by the slowly developed communication ways. After World War II
telephones became a common communication tool and international calls were
realized. In the 1950th, standardized containers were introduced and
later in newly built ports and facilities were designed to work with containerizations
all over the world. Those containers, plus telephones, improved the next step
in supply networks, they made costs of transportation and communication more
economic. Communication has been further improved during the next 40 years with
the help of new technologies such as mobile phones and the internet. Therefore,
industries started to consider not only move their manufacturing facilities but
also service teams into regions with lower labor cost.

Introduction
of Supply Chain Risk

For
reasons of focusing on core activities, increasing productivity, saving costs
and fulfilling demands, more and more organizations prefer to outsource
productions or services inshore or offshore in nowadays. Circumstances becomes
more complicated, therefore risk management on supply chain is urgently needed.
Punniyamoorthy, Thamaraiselvan and Manikandan
(2013) studied theories from various researchers and cited their point of views
in their paper. Wilding (2003) defined Supply chain “a source of competitive
advantage, that has driven organizations to pursue the dual goals of achieving
both value advantage and operational excellence” (as cited in Punniyamoorthy et
al., 2013, p.79). According to Jüttner et al. (2003) “Supply chain risk comprises
any risks for the information, material and product flows from
original supplier to the delivery of the final product for the end-user” (as
cited in Punniyamoorthy et al., 2013, p.81).

Abolghasemi,
Khodakarami and Tehranifard (2015) studied several ways of risk
classifications. In the paper A New
Approach for Supply Chain Risk Management: Mapping SCOR into Bayesian Network, they
provided some of those classifications according to different
researchers based on different factors. For example, internal and external,
qualitative and quantitative, economic and technical, and so on (p. 284). All
these classifications indicate that risks associated with supply chain are various
and complex, professionals need to be extremely careful when dealing with risks
under different circumstances.

Supply
Chain Risk Assessment

Faizal
and Palaniappan defined supply chain risk management (SCRM) “the management of
supply chain risk through coordination or collaboration among the supply chain
partners so as to ensure profitability and continuity” (2014, p.21). They also
claimed that “Risk management is the process of measuring or assessing risk and
then developing strategies to manage the risk”. These two authors classified
supply chain risk management into two main categories- risk analysis and risk
control. The importance of supply chain risk assessment in this map is because
it “provides management with an understanding of where the greatest risks may
exist in order to prioritize resources for risk mitigation and management (2014,
p.22).

There
are several tools that are being used in risk assessment. Faizal and
Palaniappan listed three of them- FMEA, FTA and ETA (2014, p. 23).

FMEA

According
to Siemens PLM Software (n.d), FMEA, which is Failure Modes and Effects
Analysis, can be used to “analyze potential failure risks within systems,
classifying them according to severity and likelihood, based on past experience
with similar products or processes” (p. 3). The white paper from Siemens (n.d)
study found the following:

FMEA defines the term “failure mode” to
identify defects or errors, potential or actual, in a product design or
process, with emphasis on those affecting the customer or end user. A “failure
effect” is the result of a failure mode on the product or system function as
perceived by the user. Failure effects can be described in terms of what the
end user may see or experience. The study of consequences of identified
failures is called effects analysis (p. 3).

FMEA
is processed by five steps, which are potential failures and effects
identification, severity determination (S), likelihood of occurrence
examination (O), failure detection (D). After completed those four steps,
professionals calculate Risk Priority Numbers (RPN), which is measured by S, O
and D.

RPN = S * O * D

This
number is used to reveal problematic areas, where “the highest RPNs should get
highest priority for corrective measures. These measures can include a variety
of actions: new inspections, tests or procedures, design changes, different
components, added redundancy, modified limits, etc.” (Siemens
PLM Software, n.d, p. 7).

FTA

            Pokorádi (2011, p.
36) introduces the Fault Tree Analysis (FTA) “a systematic, deductive (top-down
type) and probabilistic risk assessment tool which shows the causal relations
leading to a given undesired event, referred to as the Top Event (TE)”.
According to Faizal and Palaniappan, the FTA not only measures hardware
failures, but also detect human failures. A fault tree is “constructed by
relating the sequence of events, which individually or in combination, could
lead to the top event” (Faizal & Palaniappan, 2014, p. 23). Research by Pokorádi
(2011) illustrated that the FTA can be used 1) to determine faults,
fault-combinations that can occur the TE and their causes; 2) to detect
especially critical events and/or event-chains; 3) to perform reliability and
dependability investigations; 4) to demonstrate failure-mechanisms
illustratively (p. 36). Overall, the FTA is a diagnostic tool which can be used
to investigate the Top Events, which are the most undesirable outcomes in a
system.

ETA

            Event Tree Analysis (ETA) is another
risk assessment tool that has been introduced in Faizal and Palaniappan’s paper
(2014). Clifton and Ericson (2005) study found the following:

Event tree analysis (ETA) is an analysis
technique for identifying and evaluating the sequence of events in a potential
accident scenario following the occurrence of an initiating event. ETA utilizes
a visual logic tree structure known as an Event Tree (ET). The objective of ETA
is to determine whether the initiating event will develop into a serious mishap
or if the event is sufficiently controlled by the safety systems and procedures
implemented in the system design. An ETA can result in many different possible
outcomes from a single initiating event, and it provides the capability to
obtain a probability for each outcome (p. 223).

According
to Clifton and Ericson (2005), main elements of the ETA are inputs, process and
outputs. Inputs include design knowledge and accident histories on similar
equipment, while outputs include mishap outcomes, outcome risk probabilities,
causal source, and safety requirements. The six processes are 1) identify
accident scenarios; 2) identify initiating events (IEs); 3) identify pivotal
events; 4) construct event tree diagrams (ETD); 5) evaluate risk paths; 6)
document process (p. 228).

Those
tools which were listed above are not the only tools that help professionals assess
risks. In their study, Alverbro, Nevhage and Erdeniz (2010) introduced more
tools, such as Preliminary Hazard Analysis (PHA), What-if, Hazard and
Operability (Hazop), and so on. Although FMEA, FTA and
ETA all work in the supply chain risk assessment area, their concentrations and
functions are different. According to Alverbro, Nevhage and Erdeniz (2010), the
FMEA is “a qualitative method and the results are displayed in a table. The
results may include causes of failure, effect, frequency, severity, probability
and recommended actions”. The FTA “can be either qualitative or quantitative…
The difference is that a quantitative FTA results in an estimation of the
probability of the top event, which depends on the probabilities of the root
causes”. Finally, the ETA is suitable for the situation of “planning an
activity and issuing licenses and permits, and can be used both quantitatively
and qualitatively” (p. 7). 

Post Author: admin

x

Hi!
I'm Eric!

Would you like to get a custom essay? How about receiving a customized one?

Check it out