Prioritization of Risks in Supply Chains

Abstract

Modern supply chains are very complex, with physical, financial, and information flows occurring simultaneously in order to ensure that products are delivered in the right quantities, to the right place in a cost-effective manner. Maintaining uninterrupted supply chain flows is a prerequisite for the success of a supply chain in the marketplace. But there are always associated risks in each of these flows which require suitable strategies to mitigate them. The issue of risks in supply chains has assumed importance in wake of the understanding that supply chain failures are fatal to the existence of all the partners’ in a supply chain. The severity of supply chain failures are more felt by small and medium enterprises (SMEs) who form the majority at tier II and tier III levels of a supply chain. This is because of the limited resources and lack of adequate planning to counter supply chain risks. Management of risk in supply chains is a multi-criteria decision making problem. The research presented in this chapter proposes a Fuzzy-AHP based framework to prioritize various risks in supply chains. An exhaustive literature review complimented with the experts’ opinion was undertaken from the perspective of SMEs to formulate a hierarchical structure of risks in supply chains. A fuzzy analytic hierarchical process (F-AHP) is then utilized to ascertain the relative weightings which are subsequently used to prioritize these risks. Understanding the priorities would help the firms to accord importance and develop suitable strategies to manage supply chain risks according to their relative importance. This provides effective management of scarce resources available to SMEs to manage risks resident in their supply chains.