Risk mitigation in raw material distribution activities using house of risk method in manufacturing

Abstract

Supply Chain is a sequence of production processes, include raw material supply activities (inbound logistics), production processes, and distribution activities (outbound logistics). Every supply chain activity has risk. A risk mitigation strategy is important because the company will be able to identify the right strategy to handle those risks. Companies must be able to predict all risks that occur in supply chain activities, both of inbound logistics and outbound logistics. A manufacturing company in Indonesia that produces military and heavy equipment doesn’t have a risk mitigation strategy in raw material distribution activity, so this research proposes risk mitigation strategies using House of Risk method with Supply Chain Operation Reference (SCOR) models. Identification of supply chain activities involving of company’s plan, source, make, deliver, and return. House of Risk has two phases, first used to identify risk event, risk agent, and determine severity and occurrence value and calculating the Aggregate Risk Potential (ARP), second used for risk mitigation. Research results found there are 35 risk events, 51 risk agents, and three mitigation strategies that can be implemented in the company. Mitigation strategies, include: calculating the recording of revenue records for errors in the estimation of production capacity risk, procurement is not according to plan risk, and many damaged materials risk; improving the number of operators for errors in estimated production capacity risk; and Collaborative Planning, Forecasting, and Replenishment (CPFR) for error in MRP simulations risk.