International Journal of Production Research

ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage: http://www.tandfonline.com/loi/tprs20

Quantifying risks in a supply chain through

integration of fuzzy AHP and fuzzy TOPSIS
Avinash Samvedi , Vipul Jain & Felix T.S. Chan
To cite this article: Avinash Samvedi , Vipul Jain & Felix T.S. Chan (2013) Quantifying risks in
a supply chain through integration of fuzzy AHP and fuzzy TOPSIS, International Journal of
Production Research, 51:8, 2433-2442, DOI: 10.1080/00207543.2012.741330
To link to this article: http://dx.doi.org/10.1080/00207543.2012.741330

Published online: 30 Nov 2012.

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International Journal of Production Research, 2013

Vol. 51, No. 8, 24332442, http://dx.doi.org/10.1080/00207543.2012.741330

Quantifying risks in a supply chain through integration of fuzzy AHP and fuzzy TOPSIS
Avinash Samvedia, Vipul Jaina and Felix T.S. Chanb*
a

Department of Mechanical Engineering, Indian Institute of Technology Delhi, New Delhi, India;
Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hong Kong

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(Received 21 February 2012; final version received 11 October 2012)

Risk is inherent in almost every activity of supply chain management. With the ever-increasing push for
efficiency, supply chains today are getting more and more risky. Adding to the difficulty of dealing with these
risks is the amount of subjectivity and uncertainty involved. This makes analytical examination of the
situation very difficult, especially as the amount of information available at a particular time is not sufficient
for such an analysis. Thus a supply chain risk index, which captures the level of risk faced by a supply chain in
a given situation, is the need of the hour. This study is an effort towards quantifying the risks in a supply chain
and then consolidating the values into a comprehensive risk index. An integrated approach, with a fuzzy
analytical hierarchy process (AHP) and a fuzzy technique for order preference by similarity to the ideal
solution (TOPSIS) as its important elements, has been used for this purpose. Fuzzy values in this study help in
capturing the subjectivity of the situation with a final conversion to a crisp value which is much more
comprehensible. A case study is used to illustrate the proposed methodology.
Keywords: supply chain risk management; fuzzy AHP; fuzzy TOPSIS; risk index

1. Introduction
A significant feature of the rapidly evolving business climate, spurred on by significant technology shifts,
innovation, communication technologies and globalisation, is the increasing prevalence of risk in almost every
aspect of our lives (Wu and Blackhurst 2009). Risks occur because we can never know exactly what will happen in
the future. We can use the best forecasts and do every possible analysis, but there is always uncertainty about future
events (Waters 2007). This uncertainty creates a gap between what really happens and what a firm has planned for
and consequently causes losses due to the sequence of failures and/or causal events (Lewis 2003). However, as risk
has the potential for loss, organisations must assess the potential for such a sequence of failures. A crucial element of
the risk management process is the identification and assessment of risk. This process involves understanding the
conditions that give rise to potential problems, and then assessing the likelihood and negative impact of such
problems (Tapiero 2007). The result of this process will be information regarding situational risks upon which
strategic decisions can be made.
Organisations have been steadily broadening their approach to risk management since the mid twentieth
century initially focusing on insurance management, then expanding to financial, safety and public relations issues,
and finally, companywide and supply chain issues (Norrman and Lindroth 2004). This is due to the frequent
disruptions a supply chain encounters on a regular basis. Svensson (2000) defined supply chain disruptions as
unplanned events that may occur in the supply chain, which might affect the normal or expected flow of materials
and components. Disruptions not only halt supply chain operations, without preparation and precautions it takes
time for the affected system to recover (Hendricks and Singhal 2005, Sheffi and Rice 2005). All this has made
managing supply chain risks a challenge that it was never before. Whereas in the past, supply chain managers were
mainly concerned with reducing cost, reducing purchase price variance and managing inventory, today supply
continuity is the single biggest business driver.
The major hindrance in analysing risks comes from the fact that there is a lot of subjectivity involved. Input from
experts on the subject mainly comes in the form of subjective assessments. This necessitates the use of theories such
as fuzzy or grey analysis which are capable of dealing with subjectivity. Two very popular techniques previously

*Corresponding author. Email: mffchan@inet.polyu.edu.hk

2013 Taylor & Francis

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used in similar situations are fuzzy analytical hierarchy process (AHP) and fuzzy technique for order preference by
similarity to the ideal solution (TOPSIS). They have the benefit of combining approaches like fuzzy theory, which by
its very nature is built to handle subjective assessments, with analytical tools such as AHP, which is a proven tool for
handling multi criteria decision making (MCDM) problems (Karsak and Tolga 2001, Zayed et al. 2008). The
resulting tool gives us the power to make effective decisions and at the same time be imprecise while giving inputs.
That is why techniques such as fuzzy AHP are becoming increasingly popular today.
The remainder of the paper is organised as follows. Section 2 reviews the related literature on supply chain risks,
fuzzy AHP and fuzzy TOPSIS. Section 3 gives, in detail, different kinds of risk in a supply chain and a framework
for assessment. A brief description and examples are included. Section 4 describes the proposed methodology and
details the steps involved in the techniques used. Section 5 illustrates the proposed methodology through a case
study. Section 6 concludes the paper with thoughts on future research scopes.

2. Literature review
In todays scenario, supply chain participants are becoming increasingly more coupled, in the sense that decisions
taken by one firm in a supply chain directly affect the performance of other firms. This leads to the disruptions
caused at one level to be transmitted quickly to other levels and thus results in huge impacts. This has led to a
growing interest in the area of supply chain risk and its management, as evidenced in the number of industry
surveys, practitioner conferences and consultancy reports devoted to the topic, for example, McKinsey (2008).
Further, the emphasis today is in making the chain more efficient, which makes it more vulnerable and less robust in
dealing with disruptions when they occur. Moreover, there is strong evidence that such catastrophic events are
becoming more frequent (Coleman 2006). Elkins et al. (2005) observed that there has been an increase both in the
potential for disruptions and in their magnitude. Supply chain executives at IBM believe that supply chain risk
management (SCRM) is the second most important issue for them (IBM 2008). The research by AMR in 2007 also
reported that 46% of executives believe that better SCRM is needed (Hillman and Keltz 2007). Lavastre et al. (2012)
point out that SCRM is very important given the new economic and industrial environment in which firms currently
work. However, few companies have taken commensurate actions (McKinsey 2008). Moreover, the research
information available on this topic is mainly qualitative in nature (Thun et al. 2011, Simangunsong et al. 2012) and
only recently has a quantitative approach been adopted (Hillman and Keltz 2007, Wakolbinger and Cruz 2011,
Diabat et al. 2012). We try to fill this research gap by providing a risk index which will be very helpful in quantifying
supply chain risks. The methodology adopted uses an approach which is an integration of fuzzy AHP and fuzzy
TOPSIS.
AHP and TOPSIS are both multi-criteria decision-making methods. They are used for selecting the best
alternative from a given set, using their performance under different criteria and sub-criteria, which could be
either quantitative or qualitative in nature. AHP has been used in a host of different situations resulting in
very rich and extensive literature (Tabucanon et al. 1994, Gaudenzi and Borghesi 2006, Zayed et al. 2008),
however the problem of dealing with subjective assessments remains largely unsolved (Wang et al. 2008). This
has led to the inclusion of theories, such as fuzzy and grey, which are capable of dealing with subjective
assessments (Dweiri and Kablan 2006, Gu and Zhu 2006). Fuzzy AHP has proven to be a very useful tool
and quickly gained acceptance among a vast array of researchers (Chan and Kumar 2007, Huang et al. 2008,
Celik et al. 2009, Samvedi et al. 2012). The most common method used in the solution of fuzzy AHP
applications is the extent analysis method proposed by Chang (1992) (Wang et al. 2012).
TOPSIS is a widely accepted multi-attribute decision-making technique due to its sound logic, simultaneous
consideration of the ideal and the anti-ideal solutions, and easily programmable computation procedure (Kim
et al. 1997). Agrawal et al. (1991) used TOPSIS for robot selection, and Agrawal et al. (1992) employed
TOPSIS for the evaluation and selection of optimum grippers. Like AHP, TOPSIS also faced the same
constraints of not being able to handle the vague assessments given by experts and thus led to its merging with
fuzzy theory. Chen and Hwang (1992) first applied fuzzy numbers to establish fuzzy TOPSIS (Kutlu and
Ekmekcioglu 2012). Chen (2000) extended the TOPSIS method to fuzzy group decision-making situations by
considering triangular fuzzy numbers and defining a crisp Euclidean distance between two fuzzy numbers. Fuzzy
TOPSIS has been introduced for various multi-attribute decision-making problems (Chena et al. 2006, Yong
2006, Kaya and Kahraman 2011).

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3. Supply chain risks

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Supply chain risks can be categorised in many different ways and from different perspectives, such as from a
corporate governance or financial risk agenda, or even in terms of a multi-level complex system (Christopher and
Peck 2004). One simple classification can be external (emanating from factors external to the chain) and internal
risks. Examples in such classification can be natural disasters (external) and supplier quality problems (internal).
When classified in such a way, things are simplified and can be understood better, but in real practice this fails to
assign responsibility to individual firms for handling risks. Another classification can be of strategic, tactical or
operational risks, but the most comprehensive and widely used classification is the one given by Christopher and
Peck (2004). They classified risks in three categories and then further divided them into five. In this study, we treat
internal risks as one, namely process risk. We believe that it makes situations simpler to understand and also control
risks are anyway part of the process decisions and thus they can be integrated. The detailed categorisation of risks is
given in Figure 1.
The categories are briefly described below:
(1) Environmental risks: These are the risks external to the firm and can impact one echelon individually or can
impact the supply chain as a whole. Examples are natural disasters, economic downturns, terrorism, political
instability and cultural grievances. Such disasters can have a varying impact on the supply chain depending
on where they strike. If a major player in the chain suffers then whole chain will be severely impacted. There
are also risks which affect all the players, such as global downturn. The earthquake and resulting tsunami in
Japan in 2011 is a real-life example of an environmental risk.
(2) Process risks: These are the risks which are internal to the firm, and emanate from the disturbances in the
flow of the product through the different processes within a firm. These risks include machine failures, major

Figure 1. Classification of supply chain risks.

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technological changes, labour strikes and quality problems. An example is the recent labour strikes in the
Maruti Suzuki plant in India, halting the production of cars for almost a month.
(3) Demand risks: This is one of the risks internal to the chain but is external to the firm in focus, such as supply
risk. Demand risk relates to the disruptions arising from the fluctuations in demand of the product, leading
to a gap between demand and supply, thus affecting the firm. There can be various reasons for these risks.
Any change in the market can also trigger these risks. For example, a rumour of any essential commodity
being exhausted will create panic and send the demand for that product soaring. Another factor is
forecasting errors, which can never be totally removed but can be managed within limits.
(4) Supply risks: Supply risks refer to the risks emanating from the problems in a smooth flow from the
downstream side. With the continuous push being given to the outsourcing of the non-core activities of a
firm, supply risks have gained huge importance. Another factor adding to supply risks is the globalisation of
the supply chain. Due to globalisation, a host of failure modes have become attached to the upstream flow.
An example of supply risks is the classic example of Nokia and Ericsson (Norrman and Jansson 2004).

4. Methodology
This section proposes a methodology for quantifying the risks in a chain and for determining the risk index. The
methodology consists of four steps as given in Figure 2. The first step requires the firm to come up with a
comprehensive hierarchy of all the risks which may affect the firm. This is done by thoroughly studying the
considered chain and identifying potential loopholes. These are then analysed for overlaps and categorised using
similar characteristics. This exercise should be repeated whenever a major change is made in the chain. The second
step in the process involves assigning weights to the criteria according to their importance. Fuzzy AHP is used for
this purpose and expert views are taken as input. The third step involves determining the scores of different risks by
analysing them under four different criteria; namely their probability of occurrence, their impact on supply chain
performance, the effort and time required in recovering from the impact and the level at which the risk has an affect.
This is because, as can be seen from the literature, a risk affecting the strategic level is much more dangerous than
one affecting the operational level.

4.1 Fuzzy AHP

The fuzzy AHP methodology extends Saatys AHP by combining it with fuzzy set theory. In fuzzy AHP, fuzzy ratio
scales are used to indicate the relative strength of the factors in the corresponding criteria. Therefore, a fuzzy
judgment matrix can be constructed. The final scores of alternatives are also represented by fuzzy numbers. The
optimum alternative is obtained by ranking the fuzzy numbers using special algebraic operators. In this
methodology, all elements in the judgment matrix and weight vectors are represented by triangular fuzzy numbers.
Using fuzzy numbers to indicate the relative importance of one risk type over the other, a fuzzy judgment vector is
then obtained for each risk. These judgment vectors form part of the fuzzy pairwise comparison matrix which is then
used to determine the weight of each risk. Table 1 shows the meaning of linguistic expressions in the form of

Finalise the SCRM hierarchy.

Use expert advice for pairwise comparisons.

Find the weights using fuzzy AHP.

Use expert advice to tabulate risk properties.

Combine using fuzzy TOPSIS to get scores.

Consolidate scores and weights to get risk

index.

Figure 2. Flow of the proposed methodology.

Table 1. Triangular fuzzy number equivalents to the corresponding linguistic expressions.

Linguistic
expressions
Equal
Little importance
Strong importance
Very strong importance
Extreme importance

Equivalent
fuzzy numbers

Triangular fuzzy
number (l, m, u)

1
3
5
7
9

(1, 1, 3)
(1, 3, 5)
(3, 5, 7)
(5, 7, 9)
(7, 9, 9)

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fuzzy numbers. Experts are asked to give their assessment in the form of these linguistic expressions which are then
converted and analysed to finally get the weights. Changs extent analysis method has been used for determining
weights from pairwise comparisons.

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4.2 Fuzzy TOPSIS

TOPSIS is a multiple-criteria method to identify solutions from a finite set of alternatives as initially proposed by
Chen and Hwang (1992). The underlying logic of TOPSIS is to define the ideal solution and the negative ideal
solution. The alternatives are then compared with these ideal and negative ideal solutions, to find out the distances.
These distances are then used to come up with a score. The one which is closest to the ideal and farthest from the
negative ideal generally qualifies for the optimum. In fuzzy TOPSIS, the numbers are changed to fuzzy values and
the process now includes fuzzy mathematical techniques. More details about the fuzzy TOPSIS methodology can be
found in Karsak (2002). Details of the methodology are given below
(1) In this approach, we first normalise the given data column wise. This is done using the following formula
!



c
j  cij cj  bij cj  aij
,
,
rij raij , rbij , rcij
cj  a
cj  a
cj  a
j
j
j

where c
j maxi cij and aj mini aij .

(2) Define the ideal and anti-ideal solution as r
j 1, 1, 1 and rj 0, 0, 0 respectively for j 1, . . . , n.
(3) Calculate the distances of all risk types from the ideal (anti-ideal) values. The distances between two fuzzy
numbers is found by using the formula given below

DA1 , A2


1
maxja1  a2 j, jc1  c2 j jb1  b2 j
2

The distance of a risk type from the ideal (anti-ideal) values can be found by summing up the distances of
respective parameter values from the ideal (anti-ideal) values. Equal weighting has been assumed for all parameters
in this study.
(4) Calculate the score for the risk types by calculating their proximity to the ideal value, using the formula
given below
Score

Distance from the anti  ideal value

Distance from the anti  ideal value Distance from the ideal value

The scores obtained are then consolidated with the weights assigned by the fuzzy AHP method and thus the final
risk index value is reached. The next section explains the methodology with a case study as a numerical example.

5. Numerical illustration
A detailed survey of the Indian textile and steel industry was conducted to understand the status of supply chain risk
management. The survey consisted of personal interviews with the supply chain executives in these firms and an
online survey questionnaire was also used. For the survey, 157 companies were contacted. The final database
consists of data from 62 respondents in charge of supply chain management or logistics and who are therefore
assumed to be the most suitable for providing the desired information on supply chain risk management. Personal
interviews were conducted with 18 of these respondents. Based on an exhaustive literature review and rigorous
interactions with experts from the concerned industries, this survey has been used to generate the data for the
numerical illustration of the methodology.
There are two major steps in the process, namely assigning weights to all the criteria and determining the scores
of all the risks at the lowest level in the hierarchy. These two values are then consolidated into one single-risk index
value. The inputs come in the form of linguistic values. Each input parameter is divided into five linguistic
expressions with membership values, as shown in Figure 3.

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m
Low

Mild

High

V High Extreme

Table 2. Fuzzy pairwise comparison for risk types under environment category.
Terror Economic Political Cultural Natural Weights

0.2

0.4

Figure 3. Membership
expressions.

0.6

0.8

functions

of

Terror
1
Economic 5, 7, 5
Political
5, 5, 7
Cultural

Natural
7, 7, 7

1.0

the

5, 7, 3

3, 5, 1
1

7, 9, 3

5, 7, 7
7, 9, 7
3, 3, 5
1
9, 9, 9

0.123
0.272
0.17
0.027
0.424

linguistic

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Table 3. Weights assigned to the remaining risk types.

Risks
Demand
Supply
Process
Environment

Weights

Risks

Weights

Risks

Weights

Risks

Weights

0.25
0.20
0.10
0.45

Sudden fluctuations
Market changes
Competition changes
Forecasting errors

0.4
0.3
0.1
0.2

Outsourcing risks
Supplier insolvency
Quality
Sudden hike in costs

0.27
0.25
0.15
0.33

Machine failure
Labour strike
Quality problems
Technological change

0.37
0.21
0.28
0.14

The first step uses fuzzy pairwise comparisons between the criteria to assign the weights. This is similar to the
pairwise comparison part in the fuzzy AHP process. Part of it is shown in Table 2, where the risks under the
environmental category are assigned weights. The pairwise comparison matrix is compiled using expert advice and
then solved using fuzzy synthetic extent analysis. As a single expert can sometimes give erroneous data, three experts
are asked to give their advice and then the fuzzy values are averaged using fuzzy mathematics. The weights of all
other risk types, at each level of the hierarchy, are determined in the same way. Table 3 gives the weights for all the
other risk types given in the hierarchy. These weights have been generated randomly for illustration purposes.
The second step of the process, which involves assigning scores to the lower-level risks in the hierarchy, uses a
fuzzy TOPSIS process. Each risk is measured against four parameters, namely type of risk, probability of
occurrence, impact of the risk on the supply chain if it occurred and how easily the mitigation would be for the
impact of that risk. The inputs for the values of these parameters are taken from experts again in the form of
linguistic expressions which have earlier been defined as fuzzy intervals, as shown in Figure 3. Advice from three
experts is taken and averaged, as done in the previous step. The linguistic expressions are randomly generated and
are shown in Table 4. The parameter type of risk has been divided into five linguistic expressions, namely strategic
(S), mid-strategictactical (ST), tactical (T), mid-tacticaloperational (TO) and operational (O). The probability and
impact of occurrence is divided into low (L), medium (M), high (H), very high (VH) and extreme (E). Mitigation is
divided into very easy (VE), easy (E), medium (M), difficult (D) and very difficult (VD). The membership functions
assigned are the same as shown in Figure 3.
The average values of the four parameters are given in Table 5. The last column of Table 5 shows the score,
obtained for each risk using fuzzy TOPSIS. This is done by applying the previously described fuzzy TOPSIS
methodology to the three combined parameters, probability, impact and mitigation. This results in a value for each
risk which is to be multiplied by the middle value that is the most probable value of the type of risk parameter. The
resulting value is the score for that risk, as shown in the last column of Table 5.
These scores are then consolidated using the weights assigned to all the risks. This is done by first normalising all
the score values so that the range is normalised to between 01. These scores are then multiplied by the weights
assigned to the relative risks. The values obtained are then added up for the first level risks. For example, the values
for first five risks are added to give a score for the environmental risk. The scores obtained for the first level risks are
then again multiplied by the weights assigned to these first level risks and the resulting values summed up to get the
final risk index value, which in this case comes out to be 0.61. The significance of this value is judged by determining
the membership in different linguistic sets of the output function, as shown in Figure 4.

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Table 4. Expert inputs for the performance of risks on different parameters.

Risks

Type of risk

Probability

Impact

Mitigation

Terror
Economic
Political
Cultural
Natural
Outsourcing risks
Supplier insolvency
Quality
Sudden hike in costs
Sudden fluctuations
Market changes
Competition changes
Forecasting errors
Machine failure
Labour strike
Quality problems
Technological change

ST,T,T
S,S,ST
ST,ST,T
T,T,ST
ST,ST,S
T,ST,T
ST,T,ST
O,O,TO
TO,O,T
O,O,O
ST,T,ST
S,ST,S
O,O,TO
O,O,O
T,T,ST
O,O,TO
ST,ST,T

L,L,M
M,L,H
L,M,M
L,L,L
M,H,H
H,M,VH
L,M,L
VH,VH,H
H,H,VH
VH,H,M
M,H,M
M,M,L
E,VH,E
VH,E,H
H,M,M
E,VH,H
H,H,H

E,VH,H
H,VH,VH
H,H,M
M,M,L
H,VH,H
H,M,H
H,H,H
L,L,M
L,M,M
M.M.H
H,M,M
H,VH,H
M,L,L
M,M,M
H,VH,H
H,M,M
M,M,H

M,D,M
VD,VD,D
D,D,M
E,E,M
D,D,VD
M,M,D
M,M,E
E,VE,M
E,E,VE
VE,E,VE
E,M,M
M,E,M
VE,VE,E
E,E,VE
M,M,D
E,E,M
M,M,E

Table 5. Averaged values for the expert inputs and the final risk score.
Risks
Terror
Economic
Political
Cultural
Natural
Outsourcing risks
Supplier insolvency
Quality
Sudden hike in costs
Sudden fluctuations
Market changes
Competition changes
Forecasting errors
Machine failure
Labour strike
Quality problems
Technological change

Type of risk

Probability

Impact

Mitigation

Score

(0.47, 0.67, 0.87)

(0.73, 0.93, 1)
(0.53, 0.73, 0.93)
(0.47, 0.67, 0.87)
(0.67, 0.87, 1)
(0.47, 0.67, 0.87)
(0.53, 0.73, 0.93)
(0.07, 0.27, 0.47)
(0.2, 0.4, 0.6)
(0, 0.2, 0.4)
(0.53, 0.73, 0.93)
(0.73, 0.93, 1)
(0.07, 0.27, 0.47)
(0, 0.2, 0.4)
(0.47, 0.67, 0.87)
(0.07, 0.27, 0.47)
(0.67, 0.87, 1)

(0.07, 0.27, 0.47)

(0.2, 0.4, 0.6)
(0.13, 0.33, 0.53)
(0, 0.2, 0.4)
(0.33, 0.53, 0.73)
(0.4, 0.6, 0.8)
(0.07, 0.27, 0.47)
(0.53, 0.73, 0.93)
(0.47, 0.67, 0.87)
(0.4, 0.6, 0.8)
(0.27, 0.47, 0.67)
(0.13, 0.33, 0.53)
(0.73, 0.93, 1)
(0.6, 0.8, 1)
(0.27, 0.47, 0.67)
(0.6, 0.8, 1)
(0.4, 0.6, 0.8)

(0.6, 0.8, 1)
(0.53, 0.73, 0.93)
(0.33, 0.53, 0.73)
(0.13, 0.33, 0.53)
(0.47, 0.67, 0.87)
(0.37, 0.57, 0.77)
(0.4, 0.6, 0.8)
(0.07, 0.27, 0.47)
(0.13, 0.33, 0.53)
(0.27, 0.47, 0.67)
(0.27, 0.47, 0.67)
(0.47, 0.67, 0.87)
(0.07, 0.27, 0.47)
(0.2, 0.4, 0.6)
(0.47, 0.67, 0.87)
(0.27, 0.47, 0.67)
(0.27, 0.47, 0.67)

(0.47, 0.67, 0.87)

(0.73, 0.93, 1)
(0.53, 0.73, 0.93)
(0.27, 0.47, 0.67)
(0.67, 0.87, 1)
(0.47, 0.67, 0.87)
(0.33, 0.53, 0.73)
(0.2, 0.4, 0.6)
(0.13, 0.33, 0.53)
(0.07, 0.27, 0.47)
(0.33, 0.53, 0.73)
(0.33, 0.53, 0.73)
(0.07, 0.27, 0.47)
(0.13, 0.33, 0.53)
(0.47, 0.67, 0.87)
(0.27, 0.47, 0.67)
(0.33, 0.53, 0.73)

0.2981
0.3345
0.3581
0.4440
0.3099
0.2828
0.4104
0.1499
0.2298
0.1140
0.3862
0.4727
0.1481
0.1036
0.2870
0.1231
0.4291

m
Low

Mild

0.2

0.4

High

V High Extreme

0.9

0.1

Figure 4. Determining the membership value of risk score.

0.6

0.8

1.0

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The supply chain studied has a very high membership value of 0.9 in the high-risk set of the output function and
scores with a low of 0.1 for very high risk. This shows that the situation in the supply chain is highly risky and, if not
given due attention, can move to very high risk status quickly. Such news should sound a warning to the
management of the firm and they should immediately increase the timing for the resources available to the risk
management team so that mitigation can be done rapidly. The risk score table should be the starting point for the
risk management team as it details the weights given to the different risk types and also the present status of the
supply chain vulnerability from a particular risk. All the scores should be put in decreasing order and the risk
management team should start handling the top risks immediately.

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6. Conclusion
Supply chain risks are increasing everyday due to the highly turbulent environments that supply chains today face,
as well as due to the continuing emphasis on increasing efficiency. To add to the vulnerabilities, supply chains today
extend across many countries with suppliers in some of these countries bringing in diverse kinds of risks to the chain.
This adds a lot of risks to the overall supply chain. This calls for effective policies for the mitigation of these risks
and hence is of increasing importance to supply chain risk management. Effective management calls for a thorough
quantitative analysis of the situation, however risk is an intangible parameter, and is very difficult to quantify. This
has lead to research in this all-important topic to be mainly of the theoretical kind, and has inhibited quantitative
research.
In this study a comprehensive risk index has been proposed which is generic in nature and can be applied in any
industry situation. This risk index takes expert advice as its input and delivers a crisp number between 01 as the risk
score. A program in the matlab environment has been prepared and used for the numerical illustration. The
proposed methodology consists of four major steps, namely the construction of risk hierarchy for the said
environment, determination of the weights of the risk types at all levels, determination of the scores of the risk types
at the lowest level of the hierarchy and consolidation of the weights and scores into one single crisp value, which is
the risk index. The determination of the risk index should be carried out at regular intervals and also whenever a
major change is made in the supply chain, such as the addition of a major supplier. Being notified of the risk level of
the chain, an organisation can decide on when risk management needs attention. This will allow them to free up
available resources for the risk management team and thus can lower the redundancy being built into the system.
Future attempts, in proposing or improving upon the proposed risk index, can be to provide industry-specific
risk indexes. The proposed risk index is based on a generic classification of risks, which will change with industries
as finer details emerge by removing unnecessary risks. A customised risk index will be more useful as the traits of the
concerned industry are built in. Another direction of future research in this area can be to develop new risk indexes
by incorporating the new frameworks incorporating various artificial intelligence modelling techniques, multi-agent,
Petri net, graph theory, and so on, and then comparing the performances of these risk indexes with the proposed
one. This can then be further extended by developing a hybrid risk index which incorporates the best parts of the
best performing risk indexes. The resulting product will then be the optimum one and will be ready for deployment
in the industry. A further extension of this work can include considering using fuzzy ANP for weight determination.
This is because the risk types here have been considered to be independent in order to keep the methodology simple.
This may not be the case in a real-life scenario and hence fuzzy ANP, which takes into account the interrelationships
between the criteria, may be a better choice. Another extension can be to use grey methods instead of fuzzy methods,
as grey theory is more recent and is developing rapidly.

Acknowledgements
The work described in this paper was substantially supported by a grant from The Hong Kong Polytechnic University Research
Committee with financial and technical support through an internal grant (project number G-YL26).

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