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Risk analysis for the supplier selection problem using failure modes and effects analysis (FMEA)

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Abstract

While seeking for global suppliers is a general trend for lower cost and better quality, it is not trivial for a company to assess the corresponding risks in supplier selection. This paper proposes the supplier selection method that applies failures modes and effects analysis (FMEA) to assess the risks in the decision process. As each supplier is evaluated under the common multi-criteria framework, risks are viewed as the possible deviations from expected performance, and they are interpreted as failure modes in risk analysis. Following the concepts of FMEA, each failure mode is examined with respect to the possible causes and effects. This method generates two technical deliverables for supporting risk analysis. Firstly, the FMEA document is developed to support the team’s discussion of supplier risks and accumulate the risk knowledge within the company. Secondly, the ranking numbers based on FMEA (i.e., risk priority numbers) are utilized to evaluate a discount on a supplier’s performance according to their risk level. A real-case example about selecting methanol suppliers in the global market is used to demonstrate the proposed method for risk analysis in practice.

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Authors and Affiliations

  1. Department of Mechanical and Manufacturing Engineering, University of Calgary, 2500 University Drive NW, Calgary, AB , T2N 1N4, Canada

    Simon Li & Wei Zeng

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  1. Simon Li
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  2. Wei Zeng
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Correspondence to Simon Li.

Appendix: FMEA Evaluation schemes for the real-case application

Appendix: FMEA Evaluation schemes for the real-case application

This Appendix reports the FMEA evaluation schemes for the real-case application in view of severity (Table 11), likelihood (Table 12), and control (Table 13).

Table 11 FMEA evaluation scheme for severity with four criteria
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Table 12 FMEA evaluation scheme for likelihood with four criteria
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Table 13 FMEA evaluation scheme for control with four criteria
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Li, S., Zeng, W. Risk analysis for the supplier selection problem using failure modes and effects analysis (FMEA). J Intell Manuf 27, 1309–1321 (2016). https://doi.org/10.1007/s10845-014-0953-0

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