Mapping of Risks with Failure Mode and Effects Analysis

Proceedings of the 2016 Industrial and Systems Engineering Research Conference H. Yang, Z. Kong, and MD Sarder, eds. Mapping of Risks with Failure Mo...
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Proceedings of the 2016 Industrial and Systems Engineering Research Conference H. Yang, Z. Kong, and MD Sarder, eds.

Mapping of Risks with Failure Mode and Effects Analysis Abstract ID: 560 Felipe de Souza Tomé and Maria Silene Alexandre Leite Universidade Federal da Paraíba - UFPB João Pessoa, Paraíba, Brasil Djalma Araújo Rangel Instituto Federal de Educação, Ciência e Tecnologia de Minas Gerais – IFMG Gorvernador Valadares, Minas Gerais, Brasil Abstract The contribution of this article is to map cause-effect relationships of existing risks in the process of a federal public company service sector and one of its principal clients, federal agency, responsible for judicial processes. To such, a methodology for developing this article follows the Failure mode and effect analysis’ stages,: 1) survey of the potential failure mode/Type of internal risk; 2) Finding the cause / situation that can cause the risk; 3) Severity identification of the cause; 4) probability occurrence determination that the cause can generate; 5) Causes detection or potential failure modes; 6) potential effects survey of failures/ causes that can be perceived by the client; 7) Risk identification priority number, which considers the severity, occurrence and detection. As result stands out: the mapping of the causes of the fault and effects of risks; identifying points of vulnerability, such as outsourcing, increase of dependence of suppliers, financial instability, among other factors, in which the chain is exposed to in relation to the occurrence of risks.

Keywords Risks, mapping, causes, supply chain

1. Introduction Interruptions in the supply chain (SC) associated with the various types of risks (eg. uncertain economic cycles, uncertain consumer demand and unpredictable, natural and artificial disasters) can have a significant impact on short-term performance of a company. According to [1], the risks present in the SC occur by the characteristics of their own chain, creating vulnerabilities, generating possible interruptions, resulting in negative damage to organizations. Thus, risk is the expected result of an uncertain event, so uncertain event leads to existence of risks [2]. [1] Highlight important elements within the Supply Chain Risk Management (SCRM), among these elements are the “sources of risk” which affirm that there is no company strategies in identifying them. To minimize them, some researchers [3 - 7] have emphasized risk management issues as risk identification and classification, risk evaluation, risk prevention, etc. [2, 8], highlight that, due to mutual dependencies arising from relationships between members of the SC, a determined result of a company in the SC can be a "risk event" to another company. These the authors affirm to be a relevant theme, [5] present the lack of companies strategies to identify these sources. Thus, according to [9], the challenge of the Supply Chain Risk Management (SCRM) is in the establishment of a proactive process to identify possible sources of risk, measure the potential effects on a SC and select measures that could prevent or mitigate the effects. The use of tools for the identification of these risks, turns out to be essential for the best management in the chain. Thus, the companies will have a way to evaluate the risks, and make better decisions, which does not affect the supply chain, as well as bringing possible interruptions. [10 – 13]. In this context, some authors have suggested models that can serve as guidelines for the practice of this management, as the work of [3, 4, 5, 12, 14, 15, 16].

Tomé, Leite and Rangel With the aim of making the cause and effect relationships mapping of existing risks, this article presents the existing sources and consequences of the studied company as well as their risks, arising from the use of Failure Mode Effects Analysis (FMEA) tool.

2. Failure Mode And Effect Analysis The Failure Mode Effects Analysis (FMEA) is based on the following principles: a) recognize and evaluate the potential failure of a product/process and the effects of this failure; b) identify actions that could eliminate or reduce the possibility of a potential failure; c) document the entire process [20]. The FMEA is a process for evaluating and classifying risks by severity and to determine their effects, evaluating the importance of a failure mode that may involve the criticality and the risk priority number (RPN ) calculated for each of the risks identified during the analysis. The criticality is calculated by multiplying three indices: gravity, probability of occurrence and difficulty in detecting the risk. This last index is higher in those cases where the risk is difficult to detect. [17]. The application of tools has the following objectives: reduce the probability of failure occurrence in projects of new products and processes; reduce the occurrence probability of potential failures in products/processes already in operation; to increase the reliability of products or processes already in operation by means of the analysis of failures that already occurred; reduce the risks of errors and increase the quality in administrative procedures. [20]. [18, 19] highlight the FMEA through its RPN after its applicability the RPNs can be classified from the highest to the lowest, helping the managers to evaluate risks and provide guidelines Improvements in this case the larger RPNs receive most attentions. [21], emphasizes that the FMEA can be used to determine the impact of risk through RPN's, which also should be classified into different risk areas (supplier, manufacturer and client), Kumar et al, (2014), highlights that the FMEA is a reliable tool to evaluate and mitigate risks effects on the supply chain .

3. Methodology Figure 1 shows the steps followed for the development of this work. 1. Selection of the company

2. Elaboration of questionnaire

Contact with the company and selection of members.

Detailing the risk events

3. Data collection

4. Data processing

5. Risks Prioritization

Use of FMEA

Strategies to mitigate them

Interview Questionnaire application

Figure 1: Methodology Step 1: Meeting with managers of the focal company (Company A) to determine the subject client company of this study. Due to the large growth of the service sector throughout the national territory, the studied public company (company A) is present in almost all municipalities in Brazil, possessing the power to control postal services throughout the country. Company A chose one of its clients, a federal agency (Company B), present in all the Brazilian states and responsible for ensuring a complete access of claimants to justice at all stages of the process, providing conditions for the reception and treatment of manifestations of the society. Thus the chain study, involves services directly linked to the population and is also an important factor for understanding how companies are behaving. Section 4.1 described the studied chain. Step 2: The questionnaire for collecting information of the sources of risk in the selected company was elaborated. Its elaboration was made through the risk characteristics found in literature through a systematic review based on authors [22, 23, 24, 2, 4, 17, 26], therefore the risk is detailed in events for better identification and compression of respondents. The form used to identify the risks will consider the internal risks, which may prevent the company from exercising production activities being related to production systems, internal policies, procedures, processes and people. Figure 2 presents an example of the applied tool. Step 3: consists of the collection of information through the application of tool and by conducting interviews, three visits were performed to each company, A (Focal company) and Company B (client company) The interviews

Tomé, Leite and Rangel involved all related to production activity and distribution of subpoenas (postmen, agency manager, judiciary coaches, and the sector leader) on-site monitoring of the process was also conducted, in section 4.1.

Figure 2: Questionnaire for mapping risk Step 4: The FMEA tool was applied, which would assist in the treatment of the data. The Failure Mode and Effects Analysis (FMEA) evaluated the risks, calculating the risk priority number (RPN), the RPN is calculated by multiplying three factors (O, S and D) where O and S represents the occurrence and severity of a failure, and D is defined as detection, which designate the capacity to detect the failure before reaching the client. [17, 21]. In step 5, after the application of FMEA, the prioritization of risks through the RPN was verified. It helped to show the most relevant risks like its sources and possible treatments to mitigate them. From this point, the risks that had the greatest impact on the studied companies and in the relationship between them, showing their vulnerability to adopt mitigation strategies were analyzed.

4. Results and Discussions 4.1 Description of the investigated links The service sector in Brazil is the largest participant in product and employment in the country. This sector involves different branches in the national record: transport, communications; trade; financial institutions, public administrations etc. The service sector (which includes commerce), 2003 to 2013, increased from 64.7% to 69.4% of value added from Gross Domestic Product (GDP), since 2004, services have been gaining space in (GDP), according to the Trimestral National Record of the Brazilian Institute of Geography and Statistics (BIGS). The analyzed company (A) is of the federal public sector, working in the area of services, responsible for the delivery of products, and one of its principal clients is the federal agency (Company B), responsible for judicial processes. The two companies were investigated with the intention of mapping the existing risks in the process of relationship, conducting interviews with the officials and site visits. Since its creation, company A has passed various stages of restructuring and updates of its products and services. These renovations have the objective of remaining active in the market. Figure 3 presents a generic mapping of the supply chain (SC), serving only for the understanding of company A and its relationship with company B. Suppliers 1º Layer

Cleaning Transportation Safety


Client 1º Layer

Client 2º Layer

Company B

Company A

Final Clients

Figure 3: Mapping of the Supply Chain The relationships between the companies are done by contract, where company A is responsible for the distribution and delivery of judicial processes, and Company B is responsible for the execution of judicial processes or subpoenas, which is the main relationship between them. Figure 4 presents the mapping of this process, between the companies. NO

Company B

Company A

Detection problems in reception Loss?


Subpoena within the normal range of delivery?


Figure 4: Mapping of the process


Final Clients

Tomé, Leite and Rangel As identified, the judicial process is posted on Company A, which could be verified if it is within the normal range of delivery, observing any abnormality, this judicial process (subpoena) returns to company B which is responsible for the delivery to the final client. From the responsory of questionnaires and interviews the situations where the companies are subjected to risks were verified. Figure 5 presents situations in which public company (A) is exposed to and situations that arise from them, also the result of the application of Failure Mode and Effects Analysis (FMEA), where S (Severity), O (Occurrence), D (Detection) is also showed.

Figure 5: Cause and Risk failure in the Analyzed Focal Company (A) From Figure 5, we observe the risks with their situations cause and failures, these failures can cause other risks. The columns containing S, O, D and RPN product give us the most relevant and impactful risks within the company so that decisions to mitigate them can be made. It is observed that the risk of production and distribution and the risk of capacity were the most striking in Company A. It is considered that the result is coherent, because it is the service sector that develops the delivery service orders and correspondence. The same questionnaire was applied at the federal agency (Company B) for a better understanding of the risks subjected to it. Figure 6 presents these results.

Figure 6: Causes and Risk Failure in Client Company (B)

Tomé, Leite and Rangel It is verified in Figure 6 that the most shocking risks are of Production and Distribution, Client and Rupture. This is due to the fact that a public organization is providing services to the population, but in a slow and very bureaucratic manner, according to the respondents. The risks involved in this chain was verified by applying the Failure Mode and Effects Analysis (FMEA), for the prioritization of risks. The prioritization took place in agreement with those involved in the research of the operational and managerial sector. Figure 7 presents these datas. From the knowledge of the process, the causes and failures within the companies were verified and the risks in Figure 7 were confirmed by the managers responsible.

Figure 7: Cause and failure in the process within the organizations

5. Final Considerations This article presented cause and failures situations that can generate risks internally in the studied companies and in the relationship between them. The results were shown to managers and heads of sectors of both companies. In Public Company (A), focal company of this research, the most obvious risks with causes and consequences were the production and distribution, due to the fact that their services are meant for the public. Also the capacity risk shows that there is need for the improvement of human resource and addresses update. Another point would be the quantity risk, due to the shops not passing the quantity of certain materials, requested by their clients. In the federal agency (B), client company, the most obvious risks with causes and failures also is found in production and distribution, mainly due to large delay of judicial processes. Another risk that affect the development of the activity is the rupture risk, due to issues of striking labourers. Finally, the client risk is very obvious, due to offered services that generate so many dissatisfaction due to long judicial process. Thus, Table 3 presented the risks that should be prioritized for the improvement of the processes of both organizations, presenting its causes and consequences and as way of improving the process between them, like the addresses integrated system, and meetings between the managerials, because many subpoenas are not being delivered due to wrong addresses and incomplete names. As future work could calculate the cost of these risks and the relationship of the companies, there is a firmed contract between them for the execution of this service. The tools for risk evaluation can be grouped in the following categories: qualitative or hybrid nature [27]. In this context, the qualitative technics are used specially for the analysis of risk in the supply chain due to the lack of information on risk. These technics are simple and include, for example, cause and effect analysis FMEA. The case study presented these informations showing the critical points in the companies and in the relationship process between them, establishing how risk is correlated within the interconnection of companies.

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