Supply Chain FMEA Risk Analysis for the Heavy Industry Sector

*Małgorzata Dendera-Gruszka and Ewa Kulińska*

#### **Abstract**

The discussed problem is associated with the analysis of risk factors affecting supply chain management in the heavy industry sector based on the analysis of entities operating in this industry. During the research, several aspects of key importance in supply chain management in the heavy industry sector were identified. The use of the failure mode and effects analysis (FMEA) method in research has enabled the detection of defects in supply chain management and analysis of factors that may negatively affect the flow of goods. During the research, potential design flaws and the effect of these flaws were identified, indicating the class, cause, and occurrence.

**Keywords:** heavy industry, supply chain, risk analysis FMEA

#### **1. Introduction**

The need for continuous improvement of processes taking place in enterprises in order to stay on the market in the era of globalization forced on organizations is requiring cooperation. Business-to-business cooperation has evolved considerably over the past few decades. It can be safely argued that the chains of service providers from the beginning of entrepreneurship. Over time, trade has appreciated the characteristics of the supply chain and its competitive advantage. They began to create conscious networks of companies for more efficient and easier loading of goods. Services related to data flow management are most often given a competitive advantage in a given market.

The term supply chain first appeared in the 1980s. The cooperation used alone was not sufficient. In order to efficiently, dynamically, and qualitatively optimize loading of goods, such as planning, decision-making, organizing, and turning over. Over time, various concepts of supply chain management were developed toward the rapid creation, which allow the flow of goods to take place in the most efficient way [1, 2].

Do business, follow the constant decision-making process that is affected by a situation that requires operations. Risk management is defined as a set of activities that include planning, organizing, flipping, controlling, and making decisions. These operations are aimed at protecting the organization against uncertain, unexpected, and dangerous events [3, 4]. Risk management is a multistage process that aims to monitor business transactions against broadly understood danger. Activities included in the risk management use also the analysis of risk sources and their elimination. It should be taken into account that it does not always mean a negative situation and is increasingly seen as an opportunity for accessibility. Therefore, risk management may mean the elimination of the negative effects of a dangerous situation, but there may also be a chance to develop accessibility [5, 6]. The essence of risk management determines the maximum utilization of benefits by the company while minimizing possible losses [7].

In the studies presented, the FMEA analysis concerns industry analysis, not the process or product so far. This is an innovative use of FMEA risk analysis. No risk analysis has yet been developed for the industry in the context of supply chain

The FMEA analysis (**Table 1**) covers such areas of activity of the heavy industry

sector as technological, time, location, political and legal, economic, social, and environmental area. Determinants affecting supply chains in the heavy industry

**Table 1** presents all aspects that may affect supply chain management in the heavy industry sector. In the table above, individual areas of activity of business entities involved in the flow of goods in the heavy industry sector have been analyzed. The potential type of defect was defined along with its effect. The probability of occurrence of a defect is determined on a scale of 1–10. The value of 1 is assigned to an unlikely situation, while 10 to a very likely situation. The details of

The next step is to determine the cause of the defect along with determining its value. Also in this case, the cause of the defect is determined on a scale of 1–10. The value of 1 is assigned to an improbable situation and 10 to a very likely situation.

The final stage of FMEA analysis is the assignment of the RPN parameter. Assigning the above parameters to the FMEA spreadsheet allows you to specify the priority number of RPN risk, which is calculated according to the following formula:

RPN makes it possible to determine which threats carry the highest risk and the

FMEA analysis is a method of identifying and preventing problems related to the analyzed process before its implementation. It is focused on preventing process or product defects, increasing process security, financial security of the project, work safety, and environmental protection [14]. FMEA analysis is carried out at the design stage of the process or product to avoid the biggest threats and flaws in the implementation phase. This is an important technique for identifying and eliminat-

The research aimed to show the sources of risk in supply chain management in the heavy industry sector. During the analysis, RPN = 100 was determined below which the impact of factors on supply chain management is insignificant. For the industry studied, the greatest impact of risk on supply chain management has social aspects, primarily related to the lack of qualified staff, an increase in labor costs and social benefits, and the need to meet staffing needs with foreign personnel. Further aspects affecting supply chain risk management include an increase in energy and raw material prices, business relationships with customers, expansion of emerging

RPN ¼ Meaning Ið Þ� Occurrence Pð Þ� Detection Dð Þ (1)

In the next step, you need to specify preventive measures and estimate the

management.

**3. FMEA risk analysis**

sector were subjected to risk analysis.

the value assignment are set out in **Table 2**.

detection parameters, based on **Table 4**.

**4. Conclusion**

**29**

The details of the value assignment are set out in **Table 3**.

*Supply Chain FMEA Risk Analysis for the Heavy Industry Sector*

*DOI: http://dx.doi.org/10.5772/intechopen.91042*

hierarchy in which order preventive actions should start.

ing potential defects and errors in processes and products.

markets, and reduction of spatial barriers.

The meaning of words often raises doubts, and it is impossible to change clearly. Defining keywords on the basis of various sciences and theories, such as economics, law, psychology, statistics, probability theory, systems theory, or behavioral sciences, and then explicitly worded contents of the word risk, extremely difficult tasks.

The risk mainly applies to everyone and situations that should be avoided. It is also identified with chance, courage, and fate. It is a collection of activities that cause material losses and damage to the body or cause other losses. It is primarily associated with human activity and behavior [8]. Processing the definition of risk associated with the risk of positive or negative effects, expected values, uncertainty of achieving the goal [9, 10].

The failure mode and effects analysis (FMEA) method is used to identify nonconformities together with the risk of their occurrence. The method is used to determine the risk assessment arising during production, management, organization planning, etc. of given products or processes. The FMEA method works best during implementation processes, planning processes, optimization elements, or improving unstable processes. The goal of the FMEA method is to systematically identify and recognize likely product or process incompatibilities. Then, take a step that minimizes the risks associated with them, and identify the factors that most threaten the success of the product/process [11].

#### **2. Research goal and methodology**

The FMEA method is designed to detect defects at the earliest stages of the process. The FMEA method is based on the analysis of factors that may affect the process under investigation and relate to process methods, instrumentation, and environmental impact along with the definition of control measures [12, 13].

The first stage of the FMEA method concerns the selection of operations that should be analyzed along with the definition of the scope of the analysis. The number of parts and levels of the method depends on the complexity of the process [14].

The second stage consists in specifying the activities related to the FMEA analysis. First of all, potential defects that can occur in the analyzed case should be defined. After determining the sequence of events, cause-defect-effect, each defect should be assessed with an integer ranging from 1 to 10, taking into account three criteria: risk, possible occurrence of a defect, and cause [15].

The final stage of risk analysis using the FMEA method describes the elements in which changes should be made to reduce the risk of defects.

Research is based on the use of FMEA risk analysis in supply chain management in the heavy industry sector. The research lasted from 2016 to 2019. Nine business entities involved in steel production, trade, and processing were subject to examination. The entities were divided into three groups, and each group included three economic entities. The first group concerned steel companies. The headquarters of the enterprises are located in Poland, the Netherlands, and Germany. The next group concerned enterprises dealing in steel trade in Poland. The last group of enterprises is engaged in steel processing. Based on the industry analysis and intelligence in business entities, FMEA risk analysis has been developed [14].

In the studies presented, the FMEA analysis concerns industry analysis, not the process or product so far. This is an innovative use of FMEA risk analysis. No risk analysis has yet been developed for the industry in the context of supply chain management.
