Failure mode and effects analysis–analytic hierarchy process (FMEA-AHP) model in supplier risk management

Marija Panić and Que Xiaojun

Abstract

Risk management is a crucial process that enables organizations to identify, assess and manage risks that could potentially impact their goals and operations. This paper uses the failure mode and effects analysis–analytic hierarchy process (FMEA–AHP) risk model to identify and manage supplier risks in a mining firm. First, the FMEA approach is used to identify and evaluate the supplier’s risks and to determine the risk priority. Then the AHP is used to suggest several potential solutions for reducing the risks that identified by the FMEA, with each solution being evaluated based on several criteria. Validation of the risk model in this paper confirmed that it can help managers develop risk management plans and select the best course of action. The approach in this paper provides an enterprise risk management model that is universally applicable and adaptable, no matter the type of risk or the size or activity of the company.