Proactive Cost-Effective Risk Mitigation in a Low Volume High Value Supply Chain Using Fault-Tree Analysis

Article Status: Published
Publication Year: 2016
Michael D. Sherwin, Hugh Medal, Steven A. Lapp. International Journal of Production Economics, Volume 175, Pages 153–163
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In this paper we use a well-accepted methodology, fault-tree analysis, to identify delay risks and proactively propose a cost-effective mitigation strategy within a low volume high value supply chain. The basis for the assessment is the bill of materials of the product being studied. The top-level event of interest represents the delay in delivering a product to a customer and lower-level events represent the probabilities associated with delays caused by quality and capability deficiencies within the supply chain of the product being studied. Supply chain risk mitigation strategies have been well documented in academic literature. However, much of what has been documented addresses such topics as facility location, inventory buffers, and is generally focused on response strategies once the risk has been realized. This paper presents a robust method to reduce the likelihood of delays in material flow by representing the system of suppliers within a supply chain as a fault-tree and proactively determining the optimum mitigation strategy for the portfolio. The approach is illustrated via real-world numerical scenarios based on hypothetical data sets and the results are presented.