Supply chain risk identification using a HAZOP-based approach

Abstract

Risk management has become imperative for today's complex supply chains. Most approaches reported in the literature have been ad-hoc and specific to certain risks; a general and comprehensive approach is lacking. To address this, we present a structured methodology for risk identification. Supply chain networks are in many ways similar to chemical plants, therefore well-established methods and concepts from chemical process risk management can be adapted to supply chains. Drawing from this analogy, we propose to represent supply chain structure and operations using flow and workflow diagrams, equivalent to process flow diagrams (PFDs) and operating procedures. Following the HAZard and OPerability (HAZOP) analysis method common in process safety, risk identification can be performed by systematically generating deviations in different supply chain parameters and identifying their possible causes, consequences, safeguards, and mitigating actions. The application and benefits of the proposed approach are demonstrated using a refinery supply chain case study. © 2009 American Institute of Chemical Engineers.