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Agri-food supply chain: mapping particular risks

Conference Paper · June 2015

DOI: 10.13140/RG.2.2.16324.22402

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 Agri-food supply chain: mapping particular risks
Fabrício Pini Rosales (fprosales@gmail.com)
Federal University of Sao Carlos

Mário Otávio Batalha

Federal University of Sao Carlos

Lívia Maria Borges Raimundo

Federal University of Sao Carlos

Jéssica Antoneli Mazuchelli

Federal University of Sao Carlos

Abstract
The aim of this paper is identify the main specific risks of agri-food supply chain
(AFSC) based in their particularities. The spececifique characteristics of the AFSC that
differentiate them from conventional supply chain networks and they become more
complex with a direct impact on their source of risks. From a literature review, this
paper proposes a framework composed of four risk categories: (i) internal to the firm
(process, control, production, human and financial risks); (ii) internal to the AFSC
(demand, supply, market risks); (iii) external to the AFSC (environmental, climatic and
institutional risks) and product risks (product quality, safety food).

Keywords: Agri-food supply chain, supply chain risk, literature review

Introduction
In an increasingly competitive environment, the supply chain management has been one
of the key strategies adopted by companies to increase competitiveness. However, to
cope with a number of unpredictable events that strongly affect the supply chain
corporations should develop plans to manage the risks that can impact on supply chain
performance as a whole or individual firms within the sector (Faisal et al., 2006; Tomas
and Alcantara, 2013). Thus, the knowledge of the types and nature of risks that affect
the supply chains and their sources (Chopra and Sohi, 2004) is of paramount importance
to develop management strategies for mitigating risks while ensuring continuous
operation of the chain (Giunipero e Eltantawy, 2003; Kayis e Karningsih, 2012).
The spececifique characteristics of the agrifood supply chains (AFSCs) differentiate
them from conventional supply chain networks and they become more complex with a
direct impact on their source of risks. Moreover, the AFSCs may vary in size, structure,
design, and product type and such characteristics may place the AFSCs at different
levels of risk and vulnerability.
In this context, Leat and Revoredo-Giha (2013) highlight the importance of
considering the effect of systemic risks on the performance of an agrifood supply chain.
The authors report that farmers face risks in the production of agricultural raw material

1
that can affect the chain as a whole because of variations in quality, quantity, and
money prices for a variety of products will impact on the AFSC.
There is a lack of information on risk management in agrifood supply chain, mainly
with respect to the influence of such chains characteristics on the risks. Thus, this paper
aims to provide a literature review to identify the major risks of agrifood supply chains
associated with their characteristics.

The unique characteristics of agrifood supply chain

An agrifood supply chain can be described as an integrated system which encompasses
the entire manufacturing cycle from agricultural production to consumption of products,
either processed or not where the products may or may not be processed (Matopoulos et
al., 2007; Van der Vorst et al., 2007; Aramyan and Kuiper, 2009; Liu et al., 2012). The
unique characteristics of the agrifood supply chains (AFSCs) that differentiate them
from conventional supply chain networks leaves them even more exposed to risks.
These characteristics are shown in Table 1.
In this context the AFSCs become more complex than the other supply chains, which
may greatly increase their vulnerability to risks. Besides the common supply chain
risks, the agrifood supply chain have specific risk sources and other types of risks of
great importance than in another activity (Matopoulos et al., 2007; Ahumada and
Villalobos, 2008; Liu et al., 2012).

Table 1- Main characteristics and specificities of the agrifood supply chain and its consequences.
Characteristics Consequences Authors
Seasonal availability of raw Zuin and Queiroz (2006); Aramyan et
Dependence upon materials al. (2007); Moreira (2009); Batalha and
natural resources in Long-term return on investiment Silva (2011); Boehlje et al. (2011);
agricultural production Prices fluctuation due to crop Sporleder e Boland (2012); Carrer et al.
regime and off season (2013)
Raw material and final product
perishability
Marked periods of crop and off
season
Risk of contamination
Variation in quality of raw material Harwood et al.(1999); Ziggers and
and final product Trienekens (1999); Zuin and Queiroz
Biological nature of
Special needs in transport and (2006); Aramyan et al. (2007); Batalha
products
storage and Silva (2011); Sporleder and
The perishability of goods Boland (2012); Carrer et al. (2013)
Information asymmetry in relation
to product quality attributes
Concern about food safety
Importance of the sensory
characteristics of the product
Consumer concern with the Ziggers and Trienekens (1999); Zuin
methods of production and Queiroz (2006); Batalha and Silva
Seasonality of consumption (2011)
Influences of consumer
Seasonality of production
preferences and behavior
Prices fluctuation due to the
demand

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 The internal market of the AFSCs is also more complex than the markets of the other
supply chains. Given the seasonality of production of raw material and lack of
flexibility of these production systems, the offer of agro-industrial products are seasonal
with a gap between supply and demand (Harwood et al., 1999; Taylor, 2006;Sporleder
and Boland, 2012;Vlajic et al., 2012).

Methodology
In our attempt to map the agrifood supply chain specific risks, we utilize a four-step
approach: (1) literature review for recognize the characteristics of agrifood supply
chain; (2) categorizing the AFSCs according to their characteristics; (3) identifying the
key risks in each category, and (4) proposing the framework for AFSC risks analysis.
First, it was conducted a systematic review of the literature by following the steps
proposed by Denyer and Tranfield (2009). This review aimed to identify how the issue
agrifood supply chain risks has been treated in the literature (definitions, identified
risks, classification, etc.) and answer the following question: What are the main risks
which affect the agrifood supply chains?
Based on the information found in the literature, the main characteristics of AFSC
were investigated. It was noted that the agrifood supply chain can have a very large
diversity of forms and designs. The goal of this section was to propose a classification
for the diverse AFSCs.
In section 3 we seek to identify the specific risks to the agrifood supply chain. These
risks were studied taking into account the features previously found in Section 2.
Finally, a model to analyze particular risks of AFSCs was proposed.

Specific risks in agrifood supply chain

There are several definitions for risks and different theories to study the subject in
different contexts. Whith respect to the agribusiness, Leat and Revoredo-Giha (2013)
highlight the importance of two important theories relevant to the study of the risks: the
risks faced by individual enterprises and the supply chain risks. Os autores defendem
que os riscos que incidem sobre as empresas individualmente têm grande chance de se
refletirem sobre os demais agentes da cadeia, ultimately represent systemic risks for the
whole food system. The authors emphasize that the risks which affect companies
individually are likelihood to reflect on the other agents out of the chain, ultimately
represent systemic risks for the whole food system.

The risks faced by individual enterprises

Risk can be understood as the occurrence of events of any nature partially or totally
unpredictable at the decision-making and with potential to influence negatively the
results expected by companies (Nelson, 1997; Kimura, 1998; Harwood et al., 1999;
Hardaker, 2000; Huirne, 2002). The risks faced by individual companies are described
in Table 2 and can be incorporated into five broad groups, namely: (i) market risk (arise
from the volatility of crop prices and inputs); (ii) human risk (result of occurrences
within the owner's and its employees-keys); (iii) institutional risk (unpredictable change
in rules, regulations and laws governing the production systems); (iv) risk of production
(a particularity of agri-business due to the great dependence of natural and biological
conditions of agro-industrial products); (v) financial risk (loss of ability to financing and
fundraising for financial activity) (KIMURA, 1998; KAHAN, 2008; ACKAOZ, 2012;
FINGER and WAQUIL, 2012).

3
 Table 2 - main risks facing businesses individually.
Type Risks Risk Source Authors
Fluctuation in the 7; 5; 2; 6;
Excess demand or supply shortage of supplies on the market.
price of inputs 3
Fluctuation in Oversupply or lack of demand that cause the marked periods 7; 9; 5; 1;
Market risk

price of products of harvests and the off season. 6; 10

Changes in
consumer Customers concern with health and socioeconomic issues. 3; 2
preference
Market Discrepancy of power generated by the consolidation of large
4; 9
concentration corporations.
Death or long absence the owner with next generation
Family succession 7; 8
Human risk

disinterest in continuing the activity.

Health problems Accidents or illnesses of the owner or key employee. 5; 2; 3
Lack of manpower Rural exodus and lack of training programs of labor. 5; 7; 3
Lack of understanding between families concerning decisions
Family disputes 5; 2; 3
to be taken in the activity.
Changes in Government decrees that influence negatively on production
2; 6; 3
Iinstitutional

legislation systems.
Import restrictions Changes in trade relations with foreign countries. 6; 3
risk

End of
Government Government decrees. 2; 6; 11
incentives
Lack of quality of workforce and incompatibility,
9; 1; 2; 6;
Operational obsolescence or uncertainty as to the technology employed.
production

3
Risk of

7; 9; 5; 1;
Climate Unpredictability of climate change.
6; 10
Impossibility of complete control over production in large 7; 9; 5; 1;
Biological
open areas. 2; 6; 3
Great dependence on external sources for financing the
Changes in interest 7; 5; 1; 2;
activity associated with the unfavourable macroeconomic
rates 6; 3
changes.
Financial risk

Lack of financial management of the activity, large oscillation

Indebtedness in production costs, devaluation of the product, restraint of 7; 2; 6
capital, long maturation period of investments, etc.
Lack of credit Dependence on external sources for financing the activity. 2; 3
Increased
Inflation, wage increases, increase in inputs, etc. 2; 3
production costs
Non-receipt
Lack of guarantees on the transaction of sale of animals for
8
slaughter.
1. Kimura (1998); 2. Meuwissen et al. (2001); 3. FLaten et al. (2005); 4. Gonçalves (2005); 5. Vale et al.
(2007); 6. Moreira (2009); 7. Akcaoz (20012); 8. Caleman and Zylberstjan (2012); 9. Finger and Waquil
(2013); 10. Sporleder e Boland (2012); 11. Carrer et al. (2013).

With respect to the wide range of risks described in Table 2 we give emphasis to
market risk and production risk. While market risk is common to all assets likewise
negatively affects on AFSCs performance is steeper. On the other hand producers find it
difficult to deal with production risks, which may lead to significant production losses
(Kimura, 1998; Flaten et al., 2005; Spoleder and Boland, 2012).
Although the literature on this subject is limited, focusing mainly on agricultural
production risks, it is worth noting that they can impact agrifood supply chains as a
whole, either directly or indirectly. Leat and Revoredo-Giha (2013) corroborate this
statement and report that the risks faced by individual firms and supply chains are
interrelated. For example, production risks faced by growers may compromise the
quality of the end products sold to retail establishments or jeopardize the supply of raw

4
materials to the other players in the supply chain. On the other hand, market risks in
retail sector can become in demand risks for other productive agents. Hence, all the
above mentioned aspects should be taken into account when dealing with risks in agri-
food supply chain risks.

Supply chain risks

Risk in supply chains can be understood as any failure or event with the potential to
compromise the relevant flows at supply chains (SCs) (products, services, financial, and
information) with a negative impact in their operations and as consequence they are
unable to meet the demand of their customers or end users, which may negatively affect
the financial performance of the companies (Peck, 2006; Tang, 2006; Zsidisin and
Ritchie, 2009; Ghadge et al., 2012).
One of the most used models in literature to classify the RSCs is the one proposed by
Christopher and Peck (2004) which incorportates the risks in three categories: (i)
internal to the firm risks (linked to the process and control of production); (ii) external
to the firms but internal to the supply chain (encompasses risk of demand and supply
risk), and (iii) outside the supply chain (external perturbation to the chain that can
impact on one or more firms).
There is no consensus in the literature about what risks focus on supply chains and
limited data about their sources. Several authors have noted that the internal
environment, the design and chain structures, sectoral characteristics, the competitive
environment, and the specific characteristics of supply chains are the main factors that
determine the types of risks and vulnerability level of SC (Dani, 2009; Rau and Goldby,
2009; Oslon and Wu, 2010; Leat and Revoredo-Giha, 2013).
In this context, we observe that the agrifood supply chain may have different
configurations, size and structures, which have direct impact on the sources and types of
risk and vulnerability level of the chain. Based on the literature an AFSC may be
classified as:
 the purpose of the final product: an agroindustrial supply chain can be classified
into food or non-food. Food safety subject is the main difference between these
chains. The safety of the final product of an AFSC is the result from the
appropriate action from each one of their productive agents. Thus, the supply of
quality raw materials, the use of appropriate technologies and procedures at every
section in the chain, and the training and awareness of the workforce are essential
to ensure security and the well-being of the consumer. Production and processing,
transportation, storage and packaging characterize areas of vulnerabilities of food
chains (VAN DER VORST et al., 2007; LUI e t al. 2012; VLAJIC et al. 2012).
 level of products processing: the AFSC may be classified into chains of fresh
food or processed products chains. In the case of fresh products the main
processes are handling, storage, packaging, transportation, and marketing, which
allow the intrinsic properties of the raw material to remain untouched. With
respect to the processed products chains, the agricultural products are used as raw
material for the manufacture of products with higher added value and such a
process can increase the shelf-life of these products (Van der Vorst et al., 2009).
 the comprehensiveness of a chain: an agri-food supply chain can have a local or
global scope. Local food system supply chains offer locally grown food that will
meet the ever-growing consumer demand for high-quality products. In this case,
typically an individual agent is responsible for the whole manufacturing and
distribution process, allowing for information exchange between producer and
consumer. This type of chain includes particular requirements such as local
5
 distribution channel, difficult information share, communication and
collaboration, poor strategies to build relationships with suppliers and customers,
difficulty to meet the requirements of food safety and small scale of production.
Conversely the global agri-food supply chains are becoming reality thanks to a
number of trends including globalization, urbanization and concentration of retail,
and supply and demand at the international level. Thus, the agro-industrial supply
chains are becoming complex interconnected systems on a global level, which
affects the way in which products are produced, processed and distributed. (Van
der Vorst et al., 2007; Tavella and Hjortsø, 2012; Uyttendaele et al., 2012).
 perishability of the goods: the products that are commercialized within the
AFSCs can be identified as perishable or non-perishable. Perishable goods are
characterized by their short shelf-life, which requires a complex logistics process
and policy concerns regarding food security, while non-perishable items can be
stored for long periods. Models of integrated planning, risk management and
coordination within the chain, although they are important in all agro-industrial
chains, they are key elements in the chains of perishable products (Van der Vorst
et al., 2007; Ahumada and Villalobos, 2009).
On the basis of the above, one must pay attention to the fact that supply agro-
industrial chains differ much among themselves as to the size, configuration and
product type, procedures, and technologies employed, among other things. As a result
of this disparity, the level of vulnerability to different types of risks of CAS is also very
diverse. Likewise, note that RCS ratings available in literature did not contemplate the
differences between these chains, mainly as regards the characteristics of the products.
This new category must consider the characteristics of the agro-industrial supply
chains and should include quality and safety of food data such as: contamination of
goods (macrobiotic or non- macrobiotic), phytosanitary problems, health surveillance
issues and perishability of the products, among other factors that may compromise the
well-being of end users.
As indicated in Figure 1, in the proposed model, in addition to the risks internal to
the firm and internal and external to the chain, the product risk was included. Moreover,
the events to be included in this category should take into account the type of product
that flows in the chain and their structure and therefore can vary depending on the
characteristic of the studied AFSC. The categories to classify the risks proposed by
Christopher and Peck (2004) were also changed in order to include the risks that
companies have been facing, which may impact on the chain as a whole. The proposed
model encompasses the following risk categories:
 Risks internal to the firm: subdivided into control, process, production, financial,
and human risks;
 Risks internal to the agri-food supply chain: subdivided into risk of demand,
supply and market;
 Risks external to the agri-food supply chain: subdivided into environmental,
climate and institutional risk;
 Product risk: product quality and food safety.

6
 Figure 1 – Framework of mapping agri-food supply chain risks.

Conclusion
Companies are increasingly seeking ways to build effective relationships with other
firms of their supply chains in order to achieve competitive advantages. However, with
this type of partnership companies become more vulnerable to risks inherents to SC. In
this context, to an efficient risk management is essential to know the risks that impact
the different supply chains. Thus, this paper aims to provide a literature review to
identify the major risks of agrifood supply chains associated with their characteristics.
The agrifood supply chains have some characteristics that differentiate them from
other chains and such characteristics exert direct influence on their dynamic operation;
as a consequence the agri-food supply chains become more complex and exposed to
risks that are non-existent in other chains. Drawing from a systematic review of the
literature this paper classifies the AFSCs according to their main characteristics and
proposes a model for the classification of risks inherent in these chains. In this context,
the risks were classified into four categories: (i) risks internal to the firm; (ii) risks
internal to the agrifood supply chain; (iii) risks external to the agrifood supply chain;
and (iv) product risk.
Finally, the data from this study suggests that the proposed model allows us to better
understand the risks that can impact on agrifood supply chains and can be considered
the first stage for effective supply chain risk management. Therefore, the model
proposed in this paper was formulated explicitly with an eye to future empirical
research to be more favorably reviewed.

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