A Decision-Support Framework for Evaluating Supplier Portfolio Risk: Integrating the FMEA Action Priority Approach with Fuzzy Modeling

Abstract

This study develops a structured framework for the quantitative assessment of supplier-related risk in organizational supply networks. The proposed methodology is based on the Action Priority (AP) concept from Failure Mode and Effects Analysis (FMEA), which evaluates risk using three factors: Severity (S), Occurrence (O), and Detectability (D). Based on expert assessments and AP decision matrices, individual suppliers are classified into three risk categories: Low (L), Medium (M), and High (H). To enable a more rigorous analytical representation of these qualitative assessments, the risk categories are modeled using triangular fuzzy numbers (TFNs). The fuzzy values associated with individual suppliers are aggregated using the fuzzy arithmetic mean operator and subsequently defuzzified through the centroid method. After normalization, a single quantitative indicator—the Overall Supplier Risk Index—is obtained, providing insight into the company’s overall dependence on its supplier base. The proposed framework is demonstrated through a case study of a furniture manufacturing company in the wood-processing industry involving 39 strategically important suppliers. The results indicate that the analyzed company belongs to the second risk priority level, corresponding to a low overall supply risk exposure. The developed model enables the transformation of qualitative expert evaluations into a single analytical indicator, thereby supporting managerial decision-making in supplier risk monitoring and supply strategy development.