Table of Contents

Question 1 (25 Marks)

With reference to the above article, critically examine the strategic role of
supplier relationships in managing risk, promoting cost reduction, agility and
e.business.

Question 2 (25 Marks)

Critically discuss how a reactive approach to risk management would work in
the context of the article and elaborate why this approach is not appropriate
for supply chain risk.

Question 3 (25 Marks)

You are newly employed as a Supply Chain Manager in the South African
Milk Producers’ Organization (MPO). In a detailed essay, discuss the different
ways which can be used to classify risks related to the civil unrest. Use the
relevant examples from the article to justify your answer.

Question 4 (25 Marks)

With reference to the above article and the relevant literature critically discuss
the options available for managers in the Food and Agricultural Sector to
manage supply chain related risk. Make use of the relevant examples to
illustrate your answers.

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Question 1

Introduction

Supply Chain Management (SCM) is a highly dynamic upstream to

downstream distribution system that attempts to provide a service, a superior
product, and at the lowest possible cost. To do this, new concepts for SCM
development have emerged, including Lean Supply Chain (LSC), Supply
Chain Quality Management (SCQM), and Supply Chain Network Design.
When LSC uses lean to decrease waste in the distribution chain while
increasing production, expenses are cut and competitiveness is increased.

Supply Chain Management (SCM) is the science of negotiating with suppliers

and consumers from upstream to downstream in order to reduce costs and
provide higher value to customers (Boateng, 2019). The supply chain council
defines it as a network of businesses that collaborate and are linked to
control, manage, and improve the flow of products and information from
suppliers to end customers (Jaklic et al, 2006). Supply Chain Management
may alternatively be defined as the strategic and methodical coordination of
traditional business tasks that support the distribution network between clients
and the company's internal activities (Nakov et al, 2014). (Barraza et al, 2016)

Changes in supply chain distribution are quite dynamic; factors influencing it

include direct customers and announcements of new rules (Bastas and
Liyanage, 2018). According to the claims made, changes in supply chain
distribution are quite dynamic, which means the SCM topic will continue to
evolve and adapt as needed in order to deliver superior alternative options. As
a result, knowing any new notions in the discussion of SCM scientific
principles is required.

Supply chain practices have a significant impact on corporate or

organizational performance. Because it encompasses supplier management,
customer management, inventory management, distribution, development,

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and design of new products, competitive advantage demonstrates that the
supply chain is proper (Truong et al, 2016, Psomas et al, 2014).

Supply Chain Management (SCM) is a critical business process that is

organized through systemic coordination, including procurement, purchase,
conversion, and shipping (Chakraborty and Gonzalez, 2018). This critical
process encompasses many aspects of the business, including information
systems, transportation, production, sales, purchasing, and finance (Crumbly,
2015).

Lean implementation is a method of dealing with waste in the supply chain

that can maximize production, resulting in better production efficiency, lower
costs, greater flexibility, and increased competitiveness (Nimeh et al 2018).
The application of lean in the supply chain helps the system to be more
optimal and efficient in terms of satisfying consumer demand, supplying
clients, and, of course, minimizing waste (Arif-Uz-Zaman and Ahsan, 2014).

Supplier relationship management (SRM) is a methodical way to analyzing

suppliers who supply an organization with goods, materials, and services,
establishing each supplier's contribution to success, and developing plans to
improve their performance.

The SRM discipline aids in determining the value that each supplier delivers
and which ones are most important to business continuity and performance. It
also enables managers to establish stronger connections with suppliers based
on the importance of each source.

Supply chain specialists that often work with suppliers in areas such as
procurement, project management, and operations employ supplier
relationship management.

SRM, often known as supply chain relationship management, is one of many

supply chain management disciplines. There are similarities and distinctions
between vendor management and procurement processes. Vendor

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management is often concerned with setting prices and service-level
agreements between the company and its vendors, whereas procurement is
concerned with the actual purchase (i.e., ordering, contracting, invoicing and
paying).

Although different industries have different types of critical suppliers, and each
organization has its own unique mix, the overarching goal of SRM remains the
same: to streamline and improve the processes that occur between the
organization as a buyer of products and services and the businesses that
supply them.

SRM aims to develop a mutually beneficial relationship between the

organization and its suppliers, particularly those deemed most strategic to the
organization's brand, in the same way that customer relationship management
(CRM) aims to streamline and improve processes between an enterprise and
its customers. It is also intended to encourage quality, efficiency, and
innovation. A effective SRM discipline strives to maximize the value of
suppliers in order to obtain a competitive advantage in the marketplace, not
only cost savings.

As buyer-supplier networks become more global and intertwined, and firms

rely more heavily on crucial suppliers, supplier relationship management has
become increasingly important. SRM develops a framework for finding
strategic supply partners as well as organizing the relationship lifespan. Its
principles establish a shared frame of reference for successful communication
between a company and its suppliers, as well as for measuring supplier
performance.

Some suppliers are more important than others in terms of company

continuity, operational excellence, scalability, and, ultimately, profitability. A
smartphone manufacturer's stationery supplier, for example, has little
influence on profitability, but its main electronics supplier has a significant
impact, making it a critical strategic partner. Any risk to the operations of the
electronics manufacturer is a huge risk to the smartphone company.

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To achieve its objectives, an organization's SRM program must be proactive,
outlining objectives and developing a plan before approaching suppliers,
rather than reactive, engaging suppliers on an ad hoc basis or in response to
specific difficulties.

Strategic enterprise leaders, for example, may conclude that long-term

partnerships with specific suppliers are preferred to assure supply continuity,
whilst short-term agreements with other suppliers can better ensure company
agility and flexible pricing.

An effective SRM approach also necessitates the development of personal

relationships with suppliers, as well as the efforts to foster trust and mutually
beneficial collaborations when appropriate. This could imply incorporating
them in critical initiative planning or jointly developing ideas.

SRM leaders must also seek to align everyone in their organization with the
SRM program's aims and assure compliance with its objectives. They should
also have a process in place to determine the value that the SRM program
brings back to the organization.

Strategic sourcing practices related to SRM can differ from one firm to the
next. SRM, on the other hand, often entails three broad steps:

Supplier segmentation- In this initial, fundamental stage, the organization

identifies all of its suppliers and categorizes them according to their
significance to the business, ensuring that the suppliers most vital to success
receive the appropriate amount of attention.

Create a supplier strategy- In this step, the business creates a tactical plan for
how it will interact with each supplier or category of suppliers to achieve
effective and mutually beneficial relationships. Organizations should begin
with the most critical suppliers, but understand that all suppliers contribute to
success and so require a strategic approach that includes governance and

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performance management models to align business processes and allocate
stakeholders based on business goals.

Execute the supplier strategy- The executives in charge of the SRM discipline
in the organization must guarantee that the strategy is implemented and that
they or their managers take on day-to-day activities to operationalize the SRM
plans. They should also design methods for monitoring and measuring SRM
success, as well as identifying flaws and points of failure in the SRM strategy
or its implementation.

Numerous use cases for implementing SRM have been reported, with
organizations noting that the discipline helps them to: take better advantage of
supplier capabilities; reduce costs; ensure supply chain continuity; limit supply
chain risks; increase supplier responsiveness; and gain visibility into future
prices and hedge against price volatility.

More companies are discovering that risk management provides a strategic

competitive advantage and encourages a more agile supply chain than ever
before. When a common risk happens, supply chain risk management will
allow you to outperform your competition and increase market share. You will
also be able to eliminate ambiguity while building relationships and trust with
your prospects. Risk management also recognizes, optimizes, and reduces
risk exposure and cost on an ongoing basis.

Proper communication can help to prevent a crisis. Since 3PL providers

integrate technology and management tools, visibility and communication are
improved, keeping everyone informed about the flow of materials and goods.
Risk management can help you decrease the complexity of a problem and
prevent it from occurring in the first place. For example, it starts with
determining what risks can prohibit you from delivering your products on time
to your clients, analyzing how badly each risk might harm your operations,
and devising swift solutions to manage the problem.

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Risks differ from one organization to the next, but by examining the worst-
case scenario for each issue, solutions can be identified in the event that they
occur. As a result, when dangers arise, you may continue to manage your
business successfully without panicking. A third-party logistics provider (third-
party logistics provider) can assist you with this since they have processes in
place to guarantee that everything runs well and that you are aware of any
hazards.

E-commerce success requires business efficiency at all operational levels. E-

commerce relies heavily on supply chain management. E-commerce supply
chain management focuses on the purchase of raw materials, manufacturing,
and distribution of the appropriate product at the right time. It consists of
managing supply and demand, warehousing, inventory tracking, order entry,
order management, distribution, and client delivery.

The e-commerce sector is more than just creating a website and selling items
online. Product configuration, appropriate infrastructure, transportation, a
secure payment gateway, and supply chain management are all part of it. An
efficient supply chain speeds up e-commerce procedures in order to match
client expectations.

Inventory management is an important aspect of supply chain management.

Businesses used their own warehouses to sell products directly to customers
under the traditional inventory model. However, as part of the risk-sharing
plan, e-commerce enterprises no longer maintain their own inventory and
instead outsource it to a larger wholesaler. It allows e-commerce companies
to decrease the risk of maintaining their own inventory.

For inventories, several companies are using the drop-shipping concept.

According to this model, a store does not keep the product it offers on its
website in stock, but rather purchases it from a third party and ships it to the
client.

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Reverse Logistics: E-commerce companies have an SCM system that
includes reverse logistics. The planning and execution of the transportation of
commodities from the point of consumption to the place of origin is referred to
as reverse logistics. Almost all e-commerce enterprises allow for exchanges
and returns. This raises the importance of logistics.

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Question 2

Introduction

Reactive risk management is a response-based risk management technique

that is dependent on accident evaluation and audit-based conclusions, as was
the case with the KZN strikes. Reactive risk management seeks to lessen the
likelihood of the same or similar events that occurred in the past occurring
again in the future. For instance the affected organisations in the case study
will use the reactive risk management approach to ensure that if such an
incident is to occur in future they will be better prepared.

Reactive risk management is entirely based on previous inadvertent analysis

and response. Reactive risk management does not account for humans'
abilities to forecast, create, and solve problems, making it less adaptable to
changes and obstacles.

Reactive risk management is frequently compared to firefighting. When an

accident occurs or concerns are discovered following an audit, reactive risk
management is activated. The disaster is being examined, and steps are
being taken to prevent similar incidents from occurring in the future.
Furthermore, steps will be taken to mitigate the impact of the occurrence on
corporate profitability and sustainability.

Reactive risk management catalogs and documents all past incidents in order
to identify the errors that caused the accident. The reactive risk management
method recommends and implements preventive measures. This was the
previous risk management model. Reactive risk management can cause
significant delays in the workplace due to an inability to anticipate future
incidents. The unpreparedness complicates the resolution process because
the cause of the disaster requires research and the solution involves a
significant cost as well as extensive modification.

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Reactive risk management approaches are sometimes considered as the
lowest or most basic form of risk management and are commonly found in
businesses that lack a structured safety program or a safety culture. However,
it can be observed that reactive risk management approaches have a place in
all company safety management systems, including mature ones. Safety
management systems that lack a reactive component are vulnerable in
unforeseen or unwanted risk conditions.

There are several consequences of using a reactive risk management

approach as outline below:

Lawsuits is one of the negative impact of using the reactive risk management
approach. Failure to ensure that your firm complies with all rules and
regulations might raise the likelihood that you will be sued, whether by an
employee, rival, or consumer. Making sure your company's legal liability is
minimized by following guidelines is part of business risk management.

Of course, you can be sued even if your company follows both the letter and
the spirit of the law, but your chances of winning may be reduced. Lawsuits
cost your business money, whether it's through settling with a plaintiff, paying
for legal representation, or receiving actual damages in court. It makes logical
to limit the danger of a lawsuit and the likelihood of its success. These
challenges are addressed through business risk management.

Reactive risk management is also associated with catastrophic losses. Failure

to appropriately evaluate, mitigate, and reduce damage from business risks
can completely devastate your organization. You may lose market share if
you fail to anticipate the hazards of shifting conditions. If you fail to anticipate
the hazards of developing your business, you could lose a lot of money.
Failure to plan for issues could result in irreversible damage to your
company's reputation.

Theft is another consequence associated with reactive risk management. In

an ideal environment, business risk management is integrated into the

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corporate culture, permeating every position and decision. Even part-time
employees can demonstrate that you want to run a tight ship by incorporating
risk assessments. In contrast, omitting to incorporate risk management into
your business can indicate a careless approach. And for unethical staff, that
casual attitude may be both enticing and tough to ignore. You may be at risk
of staff theft unless accountability and responsibility are embedded into your
firm.

Failure to thrive is a risk that is associated with the reactive risk management.
Although it may appear contradictory, proper business risk management can
help your firm flourish. Consider this. You'd be significantly more inclined to
leap into a swimming pool if you knew the water was deep enough to keep
you safe. That doesn't mean you can't get wounded, but it does indicate
you're taking a calculated risk. But image being on a diving board and not
knowing if the pool has any water at all. Would you take the risk? No!

Reactive risk management also leads to lack of transparency. Transparency

necessitates and fosters reciprocal trust, which is an essential component of a
fully engaged workplace culture. When a corporation incorporates business
risk management into all elements of its operations, it fosters transparency—
an admission that risks exist and that the company and its employees must
work together to mitigate them. However, if risks are ignored—or worse,
disguised from employees—business owners may miss out on critical
contributions from employees. It might also build obstacles between them and
their employees. These obstructive hurdles do not foster trust. They do not
instill in employees the idea that corporate risk management is everyone's
responsibility.

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Question 3

Introduction

Every business is a complex supply chain system. Any disruption in this

supply chain will have a direct impact on the overall organization. Many
studies have been undertaken to categorize supply chain risk sources, but
very few cover all sorts of risks. This study conducted a thorough evaluation
of the literature and a content analysis on the subject. A supply chain is the
movement of information, materials, and money from suppliers to end
consumers.

In supply chain risk management literature, the term "Supply Chain Risk" has
several connotations. The most widely used definition is based on the extent
of possible losses experienced by enterprises in the supply chain as a result
of unwanted deviations from intended supply chain performance
measurements or outcomes induced by the occurrence of disruptive events.
The frequency of occurrence and the related impact on the supply chain
describe disruptive events (Heckmann et al., 2015). (Ho, et al., 2015). Supply
chain risks, according to Kajüter (as cited in Heckmann et al., 2015), might be
Cumulative, Additive, or Singular. Cumulative supply chain risks increase in
intensity as they propagate throughout the supply chain, additive risks have a
negative impact on the supply chain when they occur simultaneously, and
unique risks are locally isolated hazards that have no impact on the rest of the
supply chain.

The identification of risks is a critical first step in the SCRM process. Once the
risks have been discovered, they must be classified in order for risk managers
to comprehend the universe of risk categories as well as the events and
conditions that cause them. This insight will then aid in the selection and
design of various risk mitigation measures that are most likely to be effective
(Chopra & Sodhi, 2004). Risk classification also aids in determining which
entity within the company or supply chain will be in charge of managing a
specific risk category (Sodhi & Tang, 2012).

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Risk Sources are the resulting risk categories that result from the risk
classification procedure. Risk sources are defined as "environmental,
organizational, or supply chain related variables that cannot be predicted with
certainty and have an impact on supply chain outcome variables" (Jüttner et
al., 2003). Some scholars, such as Ho et al. (2015), have used the term Risk
Types rather than Risk Sources.

While each supply chain and its organizations are unique in terms of the risks
they face, it is critical to have a universally accepted classification of supply
chain risks in order to establish a common vocabulary for risk identification
and assessment among supply chain organizations and to standardize risk
mitigation strategies for known supply chain risks. One disadvantage of
having such a broadly accepted classification scheme is that the user of the
scheme may become trapped in a stereotyped way of thinking. However, the
advantages of having a well-defined beginning point and the discipline of a
systematic approach exceed this disadvantage. Furthermore, such a
classification scheme could serve as a significant repository of knowledge
within the discipline; for example, the insurance underwriting process employs
a risk classification scheme that serves as the basis for insurance risk
assessment as well as a knowledge base for underwriters (Asbjrnslett, 2009).

Every business is vulnerable to both internal and external risk factors resulting
from supply chain disruption.

Internal dangers are categorized into five types:

Manufacturing risks are created when internal operations or procedures are

disrupted. The civil unrest in KZN led to disturbances in the manufacturing
process as the closure of roads made it impossible for workers to travel to
their work stations. In addition, the damage to farm machinery and
infrastructure meant that the manufacturing came to a standstill.

Failure to plan for emergencies or discover alternate solutions results in

mitigation risks. The South Africa Milk Producers Organisation was caught

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unaware by the Civil unrest. They had no plan in place for such an eventuality
and as a result they had to adopt a reactive risk management approach
instead of a proactive risk management approach.

Other internal risks include: 1.Changes in key workers, management,

reporting structures, or business processes, such as how purchases are
linked to suppliers and customers, entail business risks. 2.Inadequate
evaluation and planning provide hazards to planning and control, resulting in
poor management and 3.A company's cultural proclivity to conceal or delay
unfavorable information can offer cultural risks.

External risks can be generated by events in the supply chain that occur
upstream (among your suppliers) or downstream (among your consumers).
External risks are divided into five types:

Unexpected or misread consumer or end-customer demand causes demand

risks. The looting resulted in an unprecedented demand and shortage of
products as costumers started to engage in panic buying.

Any disturbances in the movement of commodities, whether raw materials or

pieces, within your supply chain cause supply risks. Storage trucks were
unable to collect or distribute milk because of road closures. This culminated
in the dumping of up to two million litres of fuel per day.

Environmental hazards are those that arise outside of the supply chain and
are often linked to economic, social, governmental, and climate challenges, as
well as the threat of terrorism. The civil arrests in KZN are an excellent
example of environmental dangers, as they were precipitated by the
anticipated arrest of former President Jacob Zuma. As a result, the supply
chain process was disrupted.

Variables such as a supplier's financial or managerial stability, or the

purchase and sale of supplier enterprises, are examples of business risks.

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The rioting crowd's damage to the production infrastructure also demonstrates
the commercial hazards.

The state of a supplier's physical facilities and regulatory compliance produce

physical plant risks. The damage to infrastructure by the marauding crowds
rendered it impossible for the manufacturing process to take place thereby
rendering the supply chain process dysfunctional.

These can occur when a component, material, or portion required to

manufacture a final product is unavailable. Shortages can be either short-term
availability concerns or long-term if the essential items have been withdrawn
by the supplier.Shortage is another example of a risk that was a consequence
of the riots in KZN.

Conclusion

If something affects financial health, such as increasing component costs

eating into profit margins, a company may fall victim to supply chain financial
risk. Furthermore, a company's reputation may suffer if a supplier participates
in unethical behavior, such as bribery, child labor, or anything else that may
reflect negatively on the company's brand. Finally, a supplier's social media
behavior can be detrimental to your business.

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Question 4

Introduction

Farming is dangerous. Farmers face risk every day and make decisions that
affect their farming operations. Many of the factors that influence farmer
decisions cannot be forecast with 100 percent accuracy: weather conditions
fluctuate; harvest prices may fall; hired labor may not be available at peak
periods; machinery and equipment may break down when most required;
draught animals may die; and government policy may change overnight. All of
these modifications are examples of the risks that farmers confront while
running their farm as a business. All of these hazards have an impact on their
farm's profitability.

While farmers have always faced risk, farming has become increasingly
dangerous as a result of market liberalization and globalization. Smallholder
farmers are particularly vulnerable. Even for home food consumption, a
casual approach to farming is no longer practical. Farmers must improve their
professional abilities, not only in basic production but also in farm business
management. Risk management abilities are among these.

Skilled farmers and other business people will often avoid risky situations
unless there is a potential of profit. Larger profits are typically associated with
higher risks. These risky but possibly profitable circumstances must be
handled with extreme caution. Good risk management is predicting potential
problems and planning to mitigate their negative consequences. It is not
excellent risk management to just react to unfavorable occurrences after they
occur.

Supply chain managers can learn about a third-business party's practices by

conducting extensive due diligence. A fair assessment can assist eliminate
unwanted risks ranging from knowing whether the suppliers have a great track
record of satisfying contractual obligations to existing conflicts of interest in
current business connections to maintaining the high standards that your

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organization has. Before bringing on new suppliers and partners, they would
also need to guarantee that the existing supply network can meet present
needs.

Certain hazards occur from sales operations since it is a critical link in a cycle
that returns to suppliers. As the sales process evolves, it may introduce new
hazards into the operating environment. To mitigate this risk, planners must
first grasp the liability that sales contacts entail for the organization. Sales
activities that are safe and secure can help push efforts toward increased
revenue growth.

Most supply chain planners struggle to produce actual value in the existing
supply chain while also reducing organizational risks. This necessitates a
collaborative and streamlined effort from numerous corporate stakeholders,
including supply chain and procurement personnel, manufacturing and
operations expertise, legal, and finance. Validating prospective third-party
partnerships is an important first step in minimizing these risks, as is
collaborating throughout the business. These many stakeholders can then
develop a supply chain plan for increasing value within the supply chain by
using third-party partnerships.

Periodic assessment reports can serve as a useful reference tool for key
stakeholders and supply chain partners. They serve as a handy reckoner,
pointing out prospective areas for improvement and charting a course for
future progress. Most supply chain planners, on the other hand, fail to give
their vendors with any performance feedback. Any provider who does not
receive frequent feedback will be unaware of how well they are doing. As a
result, prominent corporations are now categorizing their supplier portfolio
companies based on financial spend or assigned risk in order to provide
structured feedback that can aid in risk assessment to a considerable extent.

Logistics is another critical component that has a significant impact on supply

chain risks. Rather than relying on suppliers to deliver products, supply chain
managers can organize logistics with task forces to transport items closer to

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the industrial location and where it makes economic sense. They can source
globally where savings are balanced by supply certainty. To grasp the
underlying risk, planners would need to take ownership of both the supply and
delivery processes, regardless of who has fiscal responsibility for delivery
under the terms of the sales contract.

Supply chain planners want supply chain risk management software to strict
processes and capabilities for supply chain data analytics in order to really
comprehend the fundamental nature of supply chain risks. Many firms are
now depending on modern data analytics to examine not only financial
transaction data, but also more precise operational facts, in order to
determine where their potential dangers lie.

Because of the complexity of today's operating environment, supply chain

data analytics have become crucial for identifying operational bottlenecks in
the supply chain, eliminating supply chain waste, and reducing potential fraud,
billing irregularities, and risk trends.

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