ABC Classification of Risk Factors in Production Supply Chains with Uncertain Data

Aleksandar Vujović,Aleksandar Đorđević,Milan Borota,Ranka Gojković

doi:10.1155/2017/4931797

Aleksandar Vujović, Aleksandar Đorđević + Show 2 more

Open Access

https://doi.org/10.1155/2017/4931797

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Abstract

The problem of classification of risk factors in an uncertain environment is part of the risk management problem, which has a critical effect on the competitive advantage of production supply chain. The severities of consequences, their relative importance, and the frequency of occurrence of risk factors are defined by risk management team, depending on their experience and the results of good practice. Fuzzy rating of the severities of consequences and the frequency of occurrence of risk factors are described by linguistic expressions, which are modeled by triangular fuzzy numbers. The risk values, obtained by the materialization of the identified risk factors, are given precisely with the usage of fuzzy algebra rules. The classification criterion is defined as the distance between current risk value and extreme risk values. The proposed model enables determination of the priorities of risk factors. It is illustrated by an example with real-life data from a production supply chain in auto industry.

Highlights

Due to dynamic changes in modern business environment, changes in social, economic, and demographic fields, as well as in workforce diversity, the number of possible uncertainties is constantly increasing and affecting the definition of business process strategies
The uncertainty in severity of the consequences and the frequency of occurrence of risk factors (RFs) are described by predefined linguistic expressions, which are modeled by triangular fuzzy numbers (TFNs) [19]
Management practice of PSC shows that assessment and reduction of influence of RFs lead to significant improvement and safety of business processes, and represents one of the most relevant issues of competitiveness and sustainability

Summary

Introduction

Due to dynamic changes in modern business environment, changes in social, economic, and demographic fields, as well as in workforce diversity, the number of possible uncertainties is constantly increasing and affecting the definition of business process strategies. Some authors suggest that materialization of a number of different RFs affects value of total risk [10, 11] Based on these results, the value of total risk can be reduced by the application of appropriate management initiatives. Priority of management initiatives for risk reduction is based on the obtained classification results This way, management time consumption and its overall costs are remarkably reduced and the sustainability of PDS is increased over a long period of time.

A Literature Review

Proposed Approach

Application of the Proposed Model

Findings

Conclusion