Using FMEA for Supply Chain Risk Management

Abstract

Supply chain risk management (SCRM) is a key component of not only supply success but firm success as well. Supply chain risks can be mitigated to a great extent by the qualification and selection of the appropriate supplier. The purpose of this study was to identify how companies manage supply chain risks, with a particular focus on the use of Failure Mode Effects and Analysis (FMEA). The research was largely exploratory, so a purposeful sample was used. The research questions were explored in two steps. First, a survey was sent to of 67 perceived supporters of SCRM. Second, after review of the survey data, respondents who indicated they had used FMEA as part of a supplier qualification process were contacted. This research first uses survey data to determine that FMEA is seldom used for supplier risk assessment, but provides a powerful tool for proactive SCRM. A case study is then examined to determine that many of the fundamental principles of FMEA can be applied to reduce risk in supplier selection. This study shows that the supply chain can actually be managed in much the same way as product and process defects. This paper demonstrates that by showing how FMEA can play a major role in the process of managing risks through supplier assessment and selection.