An orders-of-magnitude AHP supply chain risk assessment framework

In the current business environment, both managers and researchers have realized that assessing and managing risk in a supply chain operation is crucial to business success. Furthermore, the traditional assessment methodologies are unable to deal with intangible criteria which are crucial factor in the analysis. Thus, we develop an orders-of-magnitude AHP (OM-AHP) based ex-ante supply chain risk assessment model, to enable the comparison of the tangible and intangible elements that influence supply chain risks. In the application of OM-AHP method to risk assessment it also became apparent a formal guiding structure of how to pivot using OM-AHP did not exist. A formal method is proposed that can significantly reduce the number of needed comparisons and improve the consistency with pairwise comparisons matrices under any AHP decision. The process of the proposed supply chain risk assessment framework consists of three phases: risk identification, risk assessment, and risk ranking and analysis. An illustrative example is provided to demonstrate the efficacy of the proposed risk assessment framework. The results are organized in a 2-way risk matrix based on their probability and consequence severity and tested for robustness via sensitivity analysis.