If you have business, you must have done SWOT, PESTEL and 7P marketing mix by now. Business Failure modes and effects analysis (BFMEA) is a step-by-step approach for identifying all possible & impossible failures in a business. “Failure modes” means the ways, or modes, in which business might fail. Failures are errors, threats or conditions, especially ones that affect the business, and can be potential or actual. “Effects analysis” refers to studying the consequences of those failures. Business Failures are prioritized according to how serious their consequences are, how frequently they occur and how easily they can be detected. The purpose of the BFMEA is to take actions to eliminate or reduce failures, starting with the highest-priority ones.
Each category has a scoring matrix with a 1-10 scale.
- Severity of 1 denotes low risk to the business, and a score of 10 denotes high risk to the business.
- Occurrence of 1 denotes low probability of the risk happening, and a 10 denotes a very high probability of the risk happening to the business.
- Detection of 1 denotes a process that is unlikely to forecast a failure, and a 10 means the process will forecast any failure to business easily.
Case 1: BFMEA for Amazon eCommerce for Indian business; Wal-Mart entry into market by buying “Flipcart” major share.
Severity if high as 7, because this new platform (Flipcart plus Walmart) can eat out amazon profit.
Occurrence (rate) is low as 3, because this kind of big investment from competitor doesn’t come regularly in market.
Detection is high as 7, because Amazon can’t accurately predict what this new platform is planning to do and in which commodity / segment this will be impact.
Risk Priority Number = 7 X 3 X 7 = 147, generally speaking if RPN is above 100, In future this new platform can be a major threat to Amazon’s business. Good company must set RPN limit as low as possible in other words “any threat is major threat” for good company.
Case 2: BFMEA for Amazon eCommerce for Indian business, after launch & success of Myntra (Fast Fashion eCommerce).
Severity if high as 8 because this new successful platform is eating amazon’s profit in fast fashion segment.
Occurrence (rate) is high as 6, because there are many successful eCommerce start-ups in India.
Detection is low as 3, because Amazon can predict that this platform is for fast fashion & apparel.
RPN = 8 X 6 X 3 = 144 generally speaking if RPN is above 100 is major threat; “Myntra” is major threat to fast fashion segment of Amazon in India.
Case 3: BFMEA for Amazon eCommerce for Indian business, 5 % of buyers return what they order due to different reasons. As a result brand value, customer satisfaction, transportation cost and loss of profit.
Severity if low as 4, because this will not shut down amazon’s business in India.
Occurrence (rate) is high as 8, because this is happening regularly and leads to monthly & quarterly profit loss.
Detection is low as 3, because company can easily analyse why this is happening and manage product quality, vendor ( seller) selection, return policy, penalty on seller, banning the customer who return repetitively without any reason, optimizing user interface / user experience, authenticating image of actual product, product specification and many more quality parameters.
RPN = 4 X 8 X 3 = 96 generally speaking if RPN is above 100 is major threat. In this case as RPN is below 100, it is not threat but any problem must be resolved.
So the company should first focus on RPN 147 then RPN 144 and then RPN 96. Parallel solution is also possible if human & financial resource is available.
For any business make list of past and current failure. Also include possible, improbable and impossible future threats for business such as flood, earthquake, competition, regulation, innovation, technology change etc. Find RPN number and then prioritize countermeasure plan.
MIFT ( Mysore Institute of Fashion Technology) students, trainee and scholars study and research about fashion, makeup, forecasting, e commerce, disruptive technologies in fashion & cosmetics industry. The primary research objective is to create open industry modular ecosystem platform for fashion designers and makeup artists to work and earn in hyper personal and local market using IR 4 and 5 ( industrial revolution) technologies to disrupt connected digitalization of mass production.
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