Chapter-1

Introduction
1.1 Supply chain:
A supply chain is in the form of interconnected members along the chains it is solely responsible
to move goods, materials from one organization to another organization or from initial trader to
the very last client in their journey. They are mainly responsible for the movements of materials
from inside organization to outside organization

 Materials that moves from organization to another organization contains everything.

 The materials which are moved may be tangible or intangible like information is an
intangible where as good and materials are tangible.
There is a chain between manufacture which is responsible to accumulate the raw resources from
supplier and then it should be hand over to the final customer, the wholesaler transport variety of
product to the retailer.
When ever we ordered something from online sites like flipkart, amazon. Each the order has been
placed, a company makes sure that the ordered item is collected and deliver to the right place by
purchase, sells, rent, or on leases, making loans or by lending. All the materials accumulated at
one place and delivered to correct destination through distributor.
The only management function which is responsible for the movements of goods and material is
logistics, so for a good successful supply chain logistics must be coupled or integrated with all the
departments in the supply chain. When the materials moves inside the organization it is called
inward or inbound logistics and opposite to it when a materials go out from the organization it is
called outward or outbound logistics .And when the goods travels in the organization itself that is
called as management of material .And the organizations never works alone or say in isolation
because each time some one has to be buyer and some one has to be supplier when a customer is
purchasing from supplier it acts as a buyer and when wholesaler supplies product to the retailer
that time distributor acts as a supplier and retailer acts as a buyer .Similarly a manufacturer
purchases raw material from their supplier ,organized them into components and pass on the other
manufacturer .So in this way product go hand in hand from one department to another department.
So, there is a series of organization through which the products move from initial maker to the
very last client.

1|Page
 Fig 1 Logistics and material movements

As for example, milk is generally a product which travels from farms to the tanker accumulation,
milk dairies, plant of bottlings, distributor and then reached to the customer through
supermarket.as shown in the figure below

Fig-2 Supply chain of a milk dairy

2|Page
The institute of logistics (1998) explained that supply chain is proposed to fulfills the need of a
customer by a series of operations providing a sight that it can contain anything virtually ,views of
others were more focused ,as given by peck’s(2006) describes that materials ,goods may be
tangible and intangible like information ,money etc that moves inside the organization or outside
the organization that would be linked by many enablers, tangible or intangible organisation possess
relations ,process,informations of integrated system.
Christopher (1998) defined the supply chain as it is a organizations of networks that are connected
by various relationship through downstream and upstream in various developments that gives the
output in the form of a finished product or customer satisfaction .Each product considered to be
unique and possessed a unique supply chain ,supply chain may be short or long that will be depends
on the product through which it has to be processed ,generally long supply chain are complex in
nature as for example if we take supply chain of Cadbury that will starts from the farms where it
has been grown and last in the hands of the customer who purchases it , similarly the supply chain
for a diesel jeans initiate from the cotton which produce in the fields and ends with the customer
when someone makes the purchase .The total journey of materials in the supply chain would be
described as “from dust to dust” (Cooper, Lambert and Pagh, 1997). The journey of materials
might be very long and complicated it not ends with the customer it will go beyond the hands of
customer firstly it will travel through raw materials cultivators, merchants of raw materials,
transporters, processing companies, finishing departments, wholesalers, distributors, retailers etc.
After that it will reaches to the customer but this will not the final destination it will extend it to
recycling and recovery of the materials. If we considering risk that if any of the part of supply
chain broken or not able to integrate with the others then a risk will be created and the same risk
can be transferred to all other parts of supply chain.

3|Page
1.2 Structure of a supply chain:
To understand the supply chain in simple way is that when a sole product is travels through a
sequence in the chain. Each facilitator in the chain add some value to it. If we considered point of
view of single organisation -when materials moving inside the organizations are called upstream
and materials which travels outside the organisation called as downstream. The supply chain is
divided into tiers like first -tier, second tier and so on like activities of upstream is also bifurcated
into tiers, a material which is directly sends into the organizations is called as first tier supplier,
and second tier supplier is one who sends materials through first tier suppliers and that keeps going
on until back to the original one. Buyer or service receivers can be divided into tiers likes the one
who gets the service directly from a company called as first tier customer, and that who got it from
first tier customer is known as second tier customer and last to the final customer.
After that a manufacture takes sub assembly maker as first tier supplies, product manufacturer as
second tier, raw materials providers as third tier and so on, or it may be perceiving wholesalers as
the first tier, vendors as the second tier and last client as third tier.

Fig-3 Structure of a supply chain

4|Page
Supply chains can be of large number of configurations. Some supply chains are of long nature
and some of short and easily understandable -like when the vegetables directly buy from the farmer
by the restaurant manager and other supply chain are complex and of long nature, like a movement
of a shirt from the farms of cotton to the hands of the customer. mostly enterprises gathered raw
materials from different sources, so they incline to the main organisation because materials come
from different sources after that they scattered out in the form of products to many customers to
fulfills their needs. in reality the scenario of supply chain is enormously complex it is not as easy
as it seems. If we go for the study of supply chain of a car then we will find that hundreds of
various organizations linked to one another and each works with thousands of varieties of product.
The largest retailer company of Europe named as The French company Carrefour is consists of a
thousand of supply chain in it and the steel which is makes by Anglo -Dutch company is numerous
in the finished product. Even though we have the only concentration is materials flow. In a supply
chain there is a minimum three types of flow -flow of money, data, and materials. so, dell can be
operated on many supply chains like makings of personal computers and processing’s of
information through its chain. In actual scenario there are many sets of tangled organizations
interacting of almost unbelievable complications. Because of this supply chain gives simple
perception upon that many people argued that we should takes into account supply networks and
demand networks. others relation denotes logistics to highlight marketing, value added highlighted
by value chain (Porter, 1985), customer satisfaction highlighted by demand chain.

Fig-4 Long and short supply chain

5|Page
1.3 Supply chain management:
For the people who argue that “logistics” doesn’t provide a wide range of knowledge to experience
the full feel of that subject people started used to supply chain management since 1980
They said supply chain was the narrower topic that cannot cover the whole things, they take only
consideration of movements of materials inside or within the organisation. whereas supply chain
management concerned about the movement of all the materials in the organisation that makes a
supply chain (Larson and Halldorsson, 2004). After that Handfield and Nichols (1999) said that
It is an all-inclusive approach that include the flow of materials, cash, data etc. Though SCM tried
to highlighted the need for integration of activities as well as organisation, but for eras that has
been an Emerging idea (Forrester, 1958). The use of terms is a matter of choice of semantics, we
glued to the rule that the two serves the same purpose and this statement is accounted by the
Chartered Institute of Logistics and Transport (www.ciltuk.org.uk, 2007), they considered it as a
location of resources on the basis of time, or deliberately management of the supply chain.
The basic function of any supply chain management and “logistics” is to provide the product from
initial chain to the end of the chain. they are responsible for the movement, storage and
transportation of the raw materials or finished product.

Fig -5 Supply chain management

6|Page
1.4 Why is it important to manage supply chain (SC)
So far it was discussed what a supply chain is. We have known the stages of supply chain and
their significance in the doing profitable business now we will consider the various aspects for
managing supply chain and why it is important to manage and maintain supply chain. What is the
possible advantage of managing and controlling supply chain. Supply chain management is an
important area for a successful business for the following reasons:
1. Customer satisfaction:
As we know that customers are an important entity for a business and the businesses are build
focusing on customers need and demand. Businesses which are moving to supply chain
management are benefitting by having an enhanced customer service. Consumers nowadays wants
correct product at correct time and place with correct price for the product. Customers also look
for after sale support maintenance and replacement of the product which is possible by properly
managing the supply chain.
2. Decrease in operating cost:
The second advantage of managing supply chain is that it can help in reducing many operating
costs. Cost of purchasing can be lessened by effectively managing the supply chain as when
suppliers deliver the raw material at specified time then the cost of inventory is decreased which
will lead to ultimate cost of reduction of the purchasing process. Reduction in cost of production
can also be attributed to better supply chain management as production houses depends on supply
chain to deliver the raw materials, if the materials reach the production on time then there will be
less loss of cost which may happen when material do not reach on specified time due to supply
chain pitfalls and production is shut down due to unavailability of material. Proper supply chain
maintenance will lead to decrease the overall supply chain cost.
3. Overall profit gain:
When the operating cost is decreased than the firms profit is leveraged as a result of cost reduction.
Supply chain management will lead to decrease the dependence of firm on its fixed assets like
plant warehouses etc. When the customer is satisfied which is the result of effective supply chain
planning then there will be increase in cash flow to the firms resulting in overall gain to the
enterprise.

7|Page
4. Role in society:
As the supply chain is important in medicine industries and food industries helps people to get
their necessary items on time supply chain management helps in playing an important role in
societal improvement. If the medicines delivered to a customer is of best quality and reach on
time due to effective maintenance of supply chain then it can save the life of a person. Supply
chain management can help in improving the energy and environmental solutions. Customers
depend of electric powers for their daily household activities, if the deliveries to the customer is
on time it can reduce the fatal accidents that could be possible due to faulty supply chains.
5. Quality of life is improved:
An effective supply chain management can lead to improvement of quality of life by providing
them their products and service of high quality and on specified time. Standard of living can be
enhanced by managing supply chain. Due to effective supply chain management customers are
able to buy better products and affordable price which earlier were costing too much. Due to
management of supply chain there are more work for business enterprises for which they need
more workforce, this will eventually create more jobs in the market which will increase the
standard of living of people. Effective supply chain management can help in decreasing
environmental burden by removing hazards from the product.
Supply chain management is increasing the overall performance of the business and development
in market helping in making healthy relations with the customer.

8|Page
1.5 Aim of the supply chain management:
The existence of supply chain is to reduce the gap between the supplier and the buyer, the
operations that are best done are allowed by supply chain, the distance between the customer and
source is large in that case supply chain management works. as take an example of coffee beans,
majorly coffee beans cultivate in south America which is far away from Europe and north America
but the main customer resides in north America and Europe. similarly, the location of power station
is such that their fuel supplies and their main customer resides far away from it.
And in addition, moving materials between topographically separate tasks, supply chains take into
consideration jumbles among supply and request. The interest for sugar is pretty much steady
consistently, yet the supply differs with the reaping of sugar stick and beet. Amid the reap there is
overabundance supply, which aggregates as stock in the supply chain, and this stock is utilized to
take care of demand after the harvests wrap up.
At that point the superseding point of supply chain directors is to take care of the development and
capacity of materials. In particular, they have a limited duty regarding the development of materials
into, through and out of their own association – and after that they have a more extensive obligation
regarding the stream of materials through the entire supply chain. Customarily, directors focus on
the first of these, concentrating on those parts of the supply chain that they straightforwardly
control. Ideally, if every association takes care of its own logistics appropriately, materials move
effectively through the entire chain, so accomplishing the more extensive point. To some degree
this is valid, however it is in no way, shape or form unavoidable, and an activity that benefits a
solitary part may hurt the more extensive chain. For example, when one organization chooses to
raise its costs its own benefit may increment – however alternate individuals have a decision of
engrossing the additional expenses and diminishing their own benefits, or passing the value ascend
on and gambling a fall in conclusive client request
So, every association some of the time needs to set aside its unadulterated self-enthusiasm to
accomplish better execution for the chain overall. This is an essential standard of logistics, that
exchanging accomplices don't work in disengagement however they truly collaborate to enhance
by and large outcomes. As a general rule, this additionally gives one of the key difficulties of
supply chain administration, as most associations still spotlight without anyone else execution with
little respect for different individuals from their chains.

9|Page
1. Customer benefit:
Thinking about the essential job of logistics inside an association, its point is to enable the
association to succeed. An association can just prevail through its capacity to fulfill clients – and
when it doesn't fulfill its clients it can't hope to endure, not to mention influence a benefit, to have
exceptional yield on resources, include investor esteem or accomplish some other proportion of
progress. Be that as it may, a superseding issue with accomplishing consumer loyalty is that every
client needs extraordinary things and judges’ items by an entire arrangement of components. For
instance, when you purchase a DVD, you judge its substance, appearance, that it is so natural to
purchase, to what extent you need to pause, the amount it costs, regardless of whether the correct
DVD was conveyed, whether it was harmed, how obligingly you were treated by deals staff, and
an entire scope of different components. In any case, your neighbor will have diverse necessities
and need distinctive execution in each factor.
In any case, one basic component with consumer loyalty is that it generally depends to an
expansive degree on logistics. With the DVD, its accessibility relies upon stocks; the conveyance
time relies upon transport; harm is counteracted by great material taking care of; the cost is
influenced by logistics costs, etc. So, a principal point of logistics chiefs is to sort out the stream
of materials so as to help accomplish consumer loyalty.
Be that as it may, consumer loyalty isn't the finish of the story, as any association can give
remarkable client benefit on the off chance that it is set up to apportion enough assets. Clients will
just pay a specific sum for an item, and this constrains the assets that can be utilized to convey it.
So, a practical go for logistics is to help accomplish consumer loyalty, while utilizing accessible
assets productively and giving adequate expenses. This is the view inferred by Christopher (1998)
in his meaning of SCM as 'the administration of upstream and downstream associations with
providers and clients to convey better client esteem at less expense than the supply chain overall.
2. Action of logistics:
There are basically two sorts of choice about a supply chain. The first is to a great extent vital, and
plans the best structure for a chain. The second is about execution, and finds the most productive
methods for moving materials through the chain Harrington (1996) abridges this twofold job by
saying that 'logistics is both the paste that holds the materials/item pipeline together and the oil
that speeds item stream along it'. To accomplish this, logistics unites a progression of capacities

10 | P a g e
that are in charge of various parts of the development of materials. It is generally founded on the
accompanying center exercises
• Supply chain plan: the key capacity that finds the best structure for the supply chain, the quantity
of individuals, its length, expansiveness, areas, frameworks utilized, connections et cetera.
• Obtainment or acquiring: starts the stream of materials into an association by sending buy
requests to providers, building up the significant connections with upstream activities.
• Internal transport or activity: moves materials from providers to the association's getting zone.
• Receiving: does the fundamental registers and acknowledges conveyances with the association.
• Warehousing or stores: moves materials into capacity, deals with them and ensures that they are
promptly accessible when required.
• Stock control: sets the arrangements for stock, including stock levels, strategies and examples of
buys.
• Material taking care of: the general term for moving materials inside an association.
•Order picking: expels materials from stores and gathers them at takeoff regions prepared for
stacking on to conveyance vehicles.
•Outward transport: takes materials from takeoff zones and conveys them to clients.
• Physical conveyance administration: the general term for the conveyance of completed items to
clients, building up the real connection with downstream activities.
•Recycling, returns and waste transfer: regularly alluded to as invert logistics or turn around
appropriation, this brings different kinds of materials once again from clients.
•Communication. Nearby the stream of materials are the related streams of cash and data.
Organizing the stream of data is progressively convoluted, and logistics administrators frequently
depict themselves as preparing data instead of moving products.
In various conditions, numerous different exercises can be incorporated into SCM, for example,
re-appropriating, renting, deals determining, creation planning, client benefit administration,
abroad contact, outsider tasks et cetera. The vital point isn't to draw subjective limits between
capacities, yet to perceive that they should all cooperate to get a proficient stream of materials.
Significance of logistics:
Logistics is basic for each association. Christopher (1986) says that 'Logistics has dependably been
a focal and fundamental component of all financial action.' Shapiro and Heskett (1985) concur,
saying that 'There are couple of parts of human action that don't decisively rely upon the stream of

11 | P a g e
merchandise from purpose of root to purpose of utilization.' Without logistics, no materials move,
no activities are done, no items are conveyed and no clients are served.
In addition to the fact that logistics is basic, it is costly. Shockingly, it is hard to state precisely
how costly, as there is a decent arrangement of vulnerability in the zone. Ordinary bookkeeping
traditions don't separate logistics' expenses from other working expenses, and there is some
difference about the exercises to incorporate. Studies regularly give amazing outcomes, for
example, the discoveries by Supply Chain Process (2006) that just 31 percent of their respondents
incorporate the expense of conveying stock in their logistics, while 20 percent incorporate client
benefit. A more point by point see from PC Sciences Company (2004) recommends that most
organizations incorporate transport and warehousing in logistics costs (86 percent), acquirement
(75 percent), stock and materials management (67 percent), anticipating, arranging and booking
(51 percent) and supply chain programming and innovation (52 percent). Be that as it may, there
were still a few amazements, with 38 percent of organizations including assembling and 21 percent
including showcasing, deals and client benefit.
Due to these varieties, not very many associations can put an exact figure on their logistics
consumption, and many have no clue about the costs (Slope, 1994). A standard guideline proposes
a figure of around 16– 21 percent of turnover, however this obviously fluctuates crosswise over
ventures. Building materials, for example, sand and rock, have high logistics costs contrasted and,
say, adornments, pharmaceuticals and beautifying agents. The UK government says that 11 percent
of the Gross domestic product originates from discount and retail exchanges and 6 percent
originates from transport and capacity (Office of National Insights, 2006). These figures
recommend that general logistics' expenses are extensively higher than anticipated, maybe
supporting a prior gauge by Childerley (1980) that logistics represented 31.5 percent of the Gross
domestic product.
In spite of the fact that we may not know the exact expense of logistics, we realize that it tends to
be high. Regardless of whether it is getting costlier is available to discuss. A few people say that
fuel, arrive, security, natural assurance and representative expenses are on the whole rising, and
these are making logistics costlier. A restricting perspective says that enhanced practices are more
than making up for value rises, and the general expense is falling. The genuine picture relies upon
conditions, with the review by PC Sciences Company (2004) finding that logistics costs in 46

12 | P a g e
percent of organizations had stayed about the equivalent in the course of recent years, in 21 percent
they had risen to some degree, and in 22 percent they had fallen fairly.
3. Looking into the significance:
Logistics has the cumbersome blend of being both fundamental and costly – and it
straightforwardly influences an association's aggressiveness, execution, consumer loyalty,
working expenses and benefit, the apparent estimation of its items, and pretty much everything
else. No association can hope to succeed on the off chance that it disregards logistics, and then
again productive logistics can give an enormous upper hand. So, we can abridge the significance
of logistics by saying that it:
• Is fundamental, as all associations depend on the development of materials, even those offering
impalpable administrations;
• Is costly and regularly frames the biggest piece of expenses;
• Directly influences benefits and different proportions of authoritative execution;
• Has key significance with choices having huge impacts over the long haul;
• Is a noteworthy purpose of contact with providers and characterizes associations with upstream
activities;
• Is a noteworthy purpose of contact with clients and characterizes associations with downstream
activities;
•Affects client benefit through lead time, unwavering quality, and so on;
• Determines the best size and area of offices;
• Is risky, due to security, wellbeing and ecological concerns;
• Prohibits a few tasks, for example, moving over the top burdens or hazardous products;
• Encourages the development of related associations, for example, outsider administration
providers;
• Gives open introduction, with unmistakable areas, publicizing on trucks, and so forth.
The general message is that poor logistics management can prompt poor execution of the
association. In any case, not all mix-ups about the supply chain are a consequence of poor
management, and we found in the last section that risk can imply that great choices give poor
results, and every so often terrible choice give great results. These two components – the
significance of logistics, and the powerlessness of supply chains to risky occasions – have urged
administrators to look all the more carefully at the wide region of supply chain risk.

13 | P a g e
1.6 Risk in a supply chain:
SCM is an extremely perplexing capacity that faces a colossal scope of innate risks, extending
from the minor bothering of deferrals through to the devastation of a whole chain. Be that as it
may, an additionally stressing pattern is for logistics chiefs to change activities to give better
administration and productivity, without thinking about the results on risk. Thus, supply chains are
winding up more productive, yet at an expense of expanding powerlessness. This implies
associations are confronting more prominent interruption to a basic capacity, not as a result of
positive choices, but rather in light of the fact that chiefs don't know about the full outcomes of
their activities. What's more, an issue with any single individual from a chain extends to give
ramifications for the various individuals. This sets the scene for supply chain risk, where every
part not exclusively is powerless to its very own risks, yet additionally can be hit by risky occasions
influencing different individuals.
Notwithstanding when the individual risk to every individual from a chain is little, the total impact
over the hundreds or thousands of individuals in a huge chain turns out to be extremely critical.
You can see this impact in the overview by the Aberdeen Gathering that discovered that 81 percent
of chiefs announced disturbances to supply chains inside the former two years (Minahan, 2005).
The major causes were:
Missed or late conveyances 48%
Startling increments in supply costs 46%
Longer lead times 31%
Supply limit limitations 33%
Indeed, even a generally minor issue with a supply chain can have wide results – in the manner in
which that a postponed conveyance can influence activities, with impacts to organization notoriety,
impression of brands, capacity to win orders, quality, costs, overall revenues, lead times and a
large group of fundamental execution measures. This acknowledgment of the high expenses of
issues in the supply chain has urged chiefs to consider formal techniques for supply chain risk
management (SCRM). Yet, it isn't just costs that are driving an expanded familiarity with SCRM,
yet in addition the need to agree to new enactment and directions for enhancing corporate
administration. Different motivations incorporate developing requests from clients to give proof
of risk management methodology (with the goal that their provisions are not upset), want to dodge
any redundancy of genuine damage from risky occasions, new exchanging examples empowering

14 | P a g e
an examination of logistics exercises, and more extensive acknowledgment of the potential
mischief from helpless supply chains.
Be that as it may, the rule motivator for creating SCRM is the experimental proof that recommends
that associations with very much characterized strategies for SCRM will in general perform
superior to those with no such arrangements. This perception depends on the critical rule that
SCRM isn't an additional weight that includes work and expenses, yet is a method for diminishing
generally speaking expenses and enhancing execution. For example, diminishing the risk recently
conveyances from providers enables a firm to lessen its load of crude materials, with the
investment funds more than making up for the expanded exertion of SCRM. By utilizing such
strategies, Hewlett-Packard's acquisition risk management program is assessed to have spared the
organization $101 million more than five years.
1.7 Supply chain risk management:
The general expectation of supply chain risk management is to verify that supply chains hold to
function as arranged, with smooth and continuous streams of materials from beginning suppliers
through to definite customers. We can state this objective as far as diminishing the powerlessness
of a supply chain, expanding its capacity to oppose sudden exercises, enhancing maintainability
or developing versatility. Weakness portrays how conceivably a supply chain is to be disappeared
with unpredictable occasions. The possibility of versatility is to a great degree extraordinary, in
light of the fact that it shows the speed with which a chain can come back to typical working after
a couple of kind of harm. Along these lines, in various circumstances SCRM may both attempt to
spare you risky exercises from continuing (diminishing defenselessness) or be given that they'll
emerge and afterward return the chain to customary filling in as fast as doable (expanding
flexibility). To help its hidden objective of continuous material streams, SCRM has a gathering of
all the more promptly objectives that comprise of:
1.Designing a supply chain risk approach that fits in with higher hierarchical risk methodologies
and sets the setting for SCRM meeting any legitimate, administrative, legally binding or societal
necessities for risks;
2. Inserting risk management inside the normal for supply chain management;
3. Ensuring proper resources, frameworks, offices and foundation for SCRM;
4.Figuring out top notch rehearses for supply chain risk management, with relevant strategies,
innovation, information and making arrangements;

15 | P a g e
5. The utilization of these practices to select, look at and plan reactions to risks that are appropriate
to SCM;
6. Executing the arranged reactions to risks while essential, and controlling the consequent
activities;
7. Following by and large execution and continually creating and improving systems;
8. Participating with different parts of the association and members of the supply chain to offer a
lucid outlook closer to

Fig -6 Supply chain management framework

Note that those objectives say nothing in regards to diminishing risks. Most extreme administrators
don't care for risk, since it includes vulnerability that they can't control, so their longing is to
decrease and in a perfect world discard risk. yet, it is doubtful to go for states of the real world,
and it could never again even be practical. The Turnbull record (1999) truly expresses that 'risk
management is tied in with moderating, never again expelling risk'. What's more, Merna and Al-

16 | P a g e
Thani (2005) say, 'The assignment of risk management isn't generally to make a venture or
undertaking that is completely liberated from risks. anyway, to make the partners mindful about
the risks, both negative and positive, assist them with taking all around computed risks and to
control risks effectively.' We perceive that, in an aggressive financial framework, benefit can be
viewed as a reward for taking danger, so firms ought to search out the incredible equalization of
expenses and advantages. The message, at that point, is that compelling SCRM does now not
dispose of risks, anyway oversees them – and tilts the steadiness towards the chances and a long
way from the dangers.
1.8 Benefits of SCRM:
Achieving these objectives gives various advantages, essentially dependent on enhanced choices
and continuous operations. At whatever point a couple of unforeseen stun hits a supply chain or
there's an immense uniqueness from plans, managers by and large will in general go overboard,
causing sensational vacillations. For instance, fears about the accessibility of a couple of material
urge organizations to look for abundance stocks, include stockroom space, extend conveyance
times, switch providers etc, those are regularly nonsensical reactions that 'cost money, estrange
clients, set companies at risk for financial misfortune, and make misdirecting bends over the span
of the total supply chain' (Christopher and Lee, 2004). Such inconveniences are counteracted with
the guide of right SCRM, with various advantages including the accompanying:
1. Issues encompassing risks are mulled over right on time, and as a piece of normal management
practice.
2. Adjusted choices are reasonable, which incorporate association with risks.
3. Operations that are excessively risky or monetarily unsound are turned away.
4. Obligation regarding risk is declined to the most extreme fitting people.
5. Management generally speaking execution can be estimated, drawing a contrast between right
achievement and right management.
6. Risks are perceived before occasions certainly happen and make a calamity.
7. Early assessment of risks allows better making arrangements, prioritization and portion of
sources.
8. Elective reactions to risks might be structured, assessed, thought about and arranged.
9. Innovative reactions might be produced when there is adequate time and no pressing need to
answer to genuine occasions.

17 | P a g e
10.Plans and possibilities might be actualized brisk while unstable events unquestionably emerge.
11.Operations have less disturbance and unpredictability.
12. Continuous operations improve money related execution, client benefit, organization picture,
etc.
13. Operations are continually checked to see rising inconveniences.
14. Profiles of notable risks are built directly into an enroll that enhances reactions to future risks.
15. Propelled correspondences about risk give normal contribution and data.
16. The investigative abilities of individuals are advanced and they're permitted to give regard for
the greatest basic issues.
1.9 Risk:
Risks to the supply chain are unanticipated occasions that may interfere with the smooth stream of
materials. At the point when a provider conveys materials to a client, there are dependably risks
that the conveyance will be later than guaranteed, the merchandise will be harmed or lost, the
wrong items will be conveyed or the wrong sums, the conveyance will go to the wrong place, the
receipt will have an error, the client won't pay – or the numerous other things that can turn out
badly. These quick manifestations can prompt more far reaching impacts all through the chain.
Risks to the supply chain arrive in a gigantic assortment. Some emerge from outer impacts in the
earth, while others originate from inner tasks; some are long haul that may strike anytime into the
far future, and others are here and now and before long vanish; some have minor effect, while
others decimate whole supply chains; some show up routinely in typical activities, and others are
one-off disturbances, for example, catastrophic events. Be that as it may, the risks just truly appear
when some destructive occasions really happen.
1.9.1 Responding to risk:
There are essentially two different ways of managing risk. The first – and nearly the customary
methodology – is to just disregard it. For example, an association may rely upon a key transport
interface, for example, a compartment terminal; there might be no undeniable method for
proceeding to work if this terminal hits issues – be that as it may, as this is probably not going to
occur, the most effortless alternative is to just overlook the risk. Similarly, directors may expect
that conveyances from providers will dependably arrive when required, that there is an unfaltering
interest for items, that clients pay their bills on time, that mischances never happen, that key

18 | P a g e
individuals proceed to work, etc. This may appear to be guileless or even stupid, however
supervisors construct their choices with respect to ordinary conditions, and risky occasions are, by
definition, uncommon. For whatever length of time that things keep on working ordinarily there
are no issues, and it is just when something unforeseen really happens that issues show up.
So, disregarding a risk appears as though a sensible decision; as nothing for the most part turns out
badly, so there are once in a while issue. Also, getting ready for occasions that are far-fetched is
an exercise in futility, which supervisors could spend on different employments. What's more, as
a reinforcement, when something does really turn out badly, they will make suitable reactions to
moderate the impacts However there are two issues with this methodology. The first is the
suspicion cap risky occasions are sufficiently uncommon to overlook. Some are undoubtedly
extremely uncommon, (for example, seismic tremors in New York) – however others are normal,
(for example, late installment of a receipt). Being risky isn't the equivalent as being uncommon.
The second issue is that a receptive way to deal with issues – where chiefs hold up to perceive
what occurs, at that point understand that they need to accomplish something, structure the
reaction, actualize it and sit tight for the recuperation – is too moderate. There can be extensive
harm before the reactions wind up compelling, and administrators will then be reprimanded with
the banality that they have done 'short of what was expected'. You can envision this with the
Thames Obstruction that stops London being overwhelmed by particularly high tides. Building the
hindrance was a proactive approach that foreseen risks; a receptive arrangement would have been
holding up until the point when London really overflowed and afterward choosing what to do
Plainly a receptive methodology can be extremely costly, and a far superior alternative is to
distinguish risks ahead of time and after that set up the best reaction. This reaction may maintain
a strategic distance from the risk, or diminish its belongings, or accomplish something different.
All around attempted reactions are holding stock to maintain a strategic distance from risks to
material stream, utilizing different sourcing to beat risks from providers, having save ability to
keep away from risks to tasks, utilizing long lead times to conquer variable interest, etc. In any
case, you can see the trouble that we have just specified, that these techniques for maintaining a
strategic distance from risks frequently increment costs and lessen effectiveness.
1.9.2 Choice and risk:
Risk management has to a great extent developed from the exemplary thoughts of choice
investigation, which considers the manner in which that administrators settle on or should decide.

19 | P a g e
It depends on the conviction that a contemplated methodology gives the best choices, and directors
ought to dependably utilize reasonable investigations for their choices.
Be that as it may, you realize that expository techniques don't generally ensure the best choices.
Directors settle on choices in exceptionally complex conditions – with quickly evolving
conditions, questionable objectives, little data, tight due dates, various limitations, assorted
partners, troublesome relations with different associations, political contemplations, innate
vulnerability, changed conclusions, restricted assets and an entire scope of different
inconveniences. The standard strategies for examination are excessively oversimplified, making it
impossible to manage the majority of the complexities of genuine issues, so they can't ensure the
best arrangements (which is the reason they can't state which offers will ascend in esteem or which
pony will win a race).
The requirement for judgment, and also investigation, fortifies the perspective of 'management as
a craftsmanship' instead of 'management as a science'. This is a critical point, as it proposes that
chiefs can never ensure to settle on the correct choices yet just the ones that they believe are best
in the overall conditions. Also, when a choice gives poor outcomes, it might at present have been
the best choice, as different choices may have given surprisingly more dreadful outcomes. The
issue, once more, is vulnerability about the future – and risk. There is dependably a risk that
occasions won't happen of course, and when this happens even as well as can be expected prompt
poor outcomes – and, then again, administrators may be fortunate and settle on poor choices that
prompt shockingly great outcomes. As Merna and Al-Thani (2005) say, 'Vulnerability causes a
crack between great choices and great results.
1.9.3 vulnerability and risk:
So far, we have been utilizing the terms 'risk' and 'vulnerability', for the most part following
Hetland's (2003) see that 'risk is a ramification of a marvel being indeterminate'. Individuals
regularly accept that the two terms mean the equivalent (like Diekmann, Sewester and Taher,
1988), however in fact there is an imperative distinction. Vulnerability implies that we can list the
occasions that may occur later on, yet have no clue about which will really occur or their relative
probabilities. Risk implies that we can list the occasions that may occur later on, and can give each
a likelihood. The key contrast is that risk has some quantifiable measure for future occasions, and
vulnerability does not. When you feel that another item may offer well, you have vulnerability;
when a market overview says that there is a 71 percent possibility of it offering great, you have

20 | P a g e
risk. At the point when providers say that a conveyance of materials ought to land inside three
days, there is vulnerability; when they say that 92 percent of conveyances will touch base inside
three days, there is risk.
1.9.4 Damage and advantage:
Both risk and vulnerability manage absence of information about the future, and consider
occasions that could conceivably occur. In any case, an essential point is that hello don't state
whether the occasions are unsafe or advantageous. The future cost of oil is indeterminate, yet this
does not say whether it will rise or fall – and we may have the capacity to ascertain a risk that it
will ascend, and in addition a risk that it will fall. So, Peck (2006) can portray risk as 'a proportion
of the conceivable upside and drawback of a solitary normal and quantifiable choice'.
Directors surely want to settle on choices with more conviction, so they come to see all
vulnerability as unfortunate. By suggestion, the best alternative turns into the one with minimum
risk. Be that as it may, to protect a parity, we ought not constrain ourselves to the unsafe impacts
of vulnerability and risk, however ought to likewise consider the things that may go well. For
example, we should think about conveyances touching base on calendar, bring down costs, high
client request, rising benefits, smooth tasks, mischance free periods etc. In spite of the fact that it
may appear to be odd, we can discuss 'the risk of higher benefit' or 'vulnerability reductives

Fig -7 Balancing the potential harm and benefits from risky events

21 | P a g e
1.10 Major issues for growing concern on supply chain:
Logistics administrators are under proceeding with strain to enhance the proficiency of their supply
chains. For example, they may evacuate stocks and utilize just-in time (JIT) activities. Yet, JIT
represents the manner in which that enhancing productivity can likewise expand risks. In the past
the impacts of a minor occasion, for example, a late conveyance, could be consumed by stocks –
however now it can stop tasks and convey a whole supply chain to a halt. By expelling slack from
supply chains, chiefs are likewise making them more powerless – once in a while portrayed as
'rigid' or 'fragile.
An overwhelming component of supply chains is that all individuals are connected together, and
a risk to one is consequently exchanged to every single other part. For example, when one key
provider leaves business, it isn't only its prompt clients that are influenced, however all different
individuals from the chain. At the point when a maker stops creation, all the upstream levels of
providers are influenced back to the first providers. You can see the manner in which that supply
chain risks swell far and wide with the 2004 episode of SARS, or winged animal influenza. This
was to a great extent contained to southern China and Hong Kong, however limitations on
movement disturbed business tasks as far away as Toronto and London. So also, in 2003 tropical
storms Katrina and Rita both hit oil refineries in the Bay of Mexico, however the subsequent
feelings of dread of fuel deficiencies raised costs the world over. Regardless of the undeniable
effect of supply chain risk, this is another subject that has gotten almost no consideration.
Christopher et al (2002) say that 'it shows up from the accessible writing that the execution of risk
management in supply chains is still in its early stages'. In the previous couple of years associations
have begun gaining some ground in the territory, to a great extent spurred by the psychological
militant assault on New York's Reality Exchange Center – now generally known as '9/11'. All of
a sudden it turned out to be certain that a solitary occasion can have calamitous outcomes. Albeit
generally couple of associations were straightforwardly influenced by the assault, the brought
issues to light and new security at US fringes had far reaching impacts. The Branch of Country
Security presently facilitates the Unified States' system for fear-based oppressor dangers and
assaults, with comparative associations in different nations, for example, the UK's Considerate
Possibilities Secretariat.

22 | P a g e
1.11 Various sorts of risk in supply chain:
1. Inner risks emerge from activities inside an association. They may be: – innate risks in activities,
(for example, mischances, the dependability of gear, loss of a data innovation framework, human
blunders also, quality issues);
– Risks that emerge all the more specifically from supervisors' choices, (for example, the decision
of bunch sizes, security stock levels, money related issues and conveyance plans).
2. Supply chain risks are outside to the associations, yet inside the supply chain. These happen
from the cooperation between individuals from the supply chain, and are principally: – risks from
providers: unwavering quality, accessibility of materials, lead times, conveyance issues, modern
activity, and so forth;
– Risks from clients: variable interest, installments, issues with request handling, tweaked
prerequisites, and so forth.
The fundamental driver of these risks is deficient participation among individuals and absence of
perceivability.
3. Outside risks are outer to the supply chain and emerge from cooperation with its condition –
including mishaps, extraordinary climate, enactment, weight gatherings, wrongdoing, catastrophic
events, wars, and so on. Taken together, these kinds of risk characterize the defenselessness of a
supply chain, permitting a more particular meaning of supply chain powerlessness. Supply chain
defenselessness is the presentation of a supply chain to interruption emerging from the risks to
tasks inside every association, to communications inside the supply chain, and from the outside
condition
1.11.1 Another categorization:
This order of inside and outer risks is just a single alternative, and we can take a gander at them in
a few diverse ways. An option is to think about risks to the three related streams of materials, cash
and data in a supply chain, and after that include a fourth sort of risk dependent on the manners in
which that these streams are composed
1. Physical risks are related with the development and capacity of materials – and incorporate risk
to transport, stockpiling, conveyance, material development, stock frameworks, and so forth.
These risks commonly show up as late conveyances, interfered with transport, harm to
merchandise, lack of stock, missing items, mishaps etc.

23 | P a g e
2. Budgetary risks are related with the streams of cash – and incorporate risks to installments,
money streams, obligation, speculations, bookkeeping frameworks, and so forth. These risks show
up as poor rates of return, over the top costs, unpaid bills, lack of money, missing records etc.
3. Data risks are related with the frameworks and streams of data – and incorporate information
catch and exchange, trustworthiness, data preparing, advertise insight, framework disappointment,
and so on. These risks show up as missing information, mistakes in data, ruptures of information
security, frameworks disappointment, off base exchanges etc.
4. Authoritative risks emerge from the connections between individuals from the supply chain –
and incorporate connections among providers and clients, coalitions, shared advantages, and so
on. These risks show up as poor interchanges, lost clients, issues with provisions, contradictions
over contracts, lawful debate, and so forth.
Other proposed classifications of risks incorporate natural, request and supply, process and control
risks (Bricklayer Jones and Towill, 1998), and supply showcase, provider, administrative and
supply technique risks (Minahan, 2005). Merna and Smith (1999) give a to some degree longer
rundown of risks to undertakings, and we will utilize this way to deal with give the accompanying
rundown of normal risks to supply chains:
•Strategic – emerging from vital choices made inside associations that straightforwardly increment
the risk.
• Natural – emerging from unexpected characteristic occasions, for example, outrageous climate,
lightning, seismic tremors, surge, avalanches or flare-ups of infections;
• Political –, for example, government shakiness, new enactment, (for example, the Sarbanes–
Oxley Act), directions, approaches, licenses, arrangements, traditions obstructions, clashes or
wars;
• Economic – from the wide financial condition, including loan costs, swelling, money trade rates,
duties and development;
• Physical – risks to structures and offices, for example, car crashes, hardware disappointment,
clog or restricted limit;
• Supply – all issues with the development of materials into an association, including sources,
supply economic situations, requirements, constrained accessibility, provider dependability, lead
times, material expenses, delays, and so on;

24 | P a g e
• Market – all parts of client request, for example, level of interest, inconstancy, elective items,
rivalry and examples of progress;
• Transport – for all developments of materials, including risks to the foundation, vehicles, offices
and burdens;
• Products – risks emerging from item includes, including innovation utilized, development, item
blend, run, volumes, materials utilized and institutionalization;
• Operations – emerging from the idea of exercises in the association, sort of process, intricacy,
innovation, uncommon conditions, after-deals benefit, and so on;
• Financial – all cash exchanges, including installments, costs, costs, sourcing of assets, benefit
and general monetary execution;
• Information – including the accessibility of information, information exchange, exactness,
unwavering quality, security of frameworks, and so on;
• Organization – emerging from the manner in which the association works, including its structure,
debate, kinds of collaborations, subcontractors, correspondence streams, culture, and so on;
• Management – and risks emerging from their insight, abilities, encounter, choices, genuine
points, and so forth;
• Planning – risks from the structure and execution of plans for tasks, including bungle among
supply and request, deficient detail, missed imperatives, poor anticipating, absence of
synchronization, and so on.
• Human – from all the intricate associations between individuals, including working necessities,
points, culture, human blunders and modern activity;
• Technical – and new innovation in procedures, interchanges, new items, process structures and
unwavering quality;
• Criminal – emerging from every single illicit action, for example, robbery, misrepresentation,
renumeration, vandalism and fear-based oppression;
• Safety – to individuals and offices, including mischances, perilous substances and fire;
• Environment – eg: contamination, utilization of assets, movement and directions;
• Local licenses – as a rule managed by nearby government and including arranging consents,
arrive utilize, neighborhood approaches, stipends, and so on.

25 | P a g e
 Fig -8 supply chain risk
1.11.2 Trade and Administrative risk:
We realize that risks are not restricted to singular individuals from a supply chain however are
transmitted to all individuals, and the exercise is that associations ought not work in disengagement
but rather should arrange their risk management to handle their regular issues. Another feature of
shared risks is the distinction between association particular and expansive risks. An association
particular risk influences an individual business (or all the more precisely its supply chain),
normally decreasing its piece of the pie, salary, benefit, aggressiveness and execution by and large.
The fact of the matter is that one association is missing out to others in a similar industry. These
impacts might be here and now, yet with major issues they can turn out to be long haul or even
changeless. Then again, an all-inclusive risk influences all associations in a similar industry,
abandoning them all in a comparable situation – in the manner in which that all vehicle
organizations endure when fuel costs rise and all venture organizations endure when securities
exchanges fall.
The significance of this distinction shows up with the kind of reaction. An association particular
risk urges each firm to work in detachment, caring for its very own advantages and searching for
an upper hand over contenders hit by issues. A vast risk energizes participation, with contenders
cooperating to beat risks for their common advantage. This gives a reasonable message that the

26 | P a g e
extent of the risk decides the best kind of reaction – and especially whether it is best to work in
segregation or participate with different individuals from the chain or industry. Considering this,
Christopher et al (2002) portray risk as happening at four levels
Level 1: Risk to basic activities. This perspective the supply chain as a straightforward pipeline,
with risk influencing the smooth stream of materials, cash and data. Risks originate from issues
with material stream, fluctuation sought after and other economic situations. At that point the best
way to deal with risk management is to enhance perceivability, giving more effective streams and
better-controlled activities.
Level 2: Risk to resources and foundation. This considers the advantages used to move the
materials, cash and data considered at level 1, with the supply chain characterized regarding its
foundation. The hubs in the supply chain are the offices that house resources, (for example,
manufacturing plants, logistics focuses, retail outlets, and so forth) and these are connected through
the foundation (streets, pipelines, correspondences, and so forth). Presently the risks show up as
potential harm to the connections or hubs – and these are regularly handled by actuarial
examinations dependent on verifiable information.
Level 3: Risk to associations and between hierarchical systems. This means back to consider
supply chains as systems of exchanging connections between associations that possess and deal
with the advantages. Presently risks show up as fizzled connections between these associations,
emerging through redistributing, business disappointments, mergers, acquisitions, predominant
associations and all other potential issues with such systems. The most ideal approaches to oversee
such risks incorporate nearer, long haul connections, associations, various sourcing and re-
appropriating.
Level 4: Risk from the earth. This incorporates all parts of the business, market, business and
physical condition inside which the supply chain works. The issue here is that risks are outside the
control of supply chain administrators, however they can design their reaction. For instance,
another innovative improvement may make interest for a current item less certain; an organization
can't maintain a strategic distance from this risk, however it can make emergency courses of action,
maybe ending up defter to react rapidly to evolving markets.
1.11.3 Enigmatic risk:
Maybe the best issue with distinguishing risks is the one, that it is essentially difficult to recognize
each possible risk. Notwithstanding when directors put a considerable measure of exertion into

27 | P a g e
figures and do each possible examination, what's to come is basically capricious and there will in
any case be unanticipated occasions. For example, a noteworthy seismic tremor in a steady district
is basically unforeseeable – just like a fear monger assault, the flare-up of SARS, modern activity,
fuel deficiencies and numerous other outside occasions that can disturb supply chains. There are
four reasons why occasions are unforeseeable:
1. Intrinsically mysterious risks are the genuine questions, where risks are totally covered up and
just rise when surprising occasions all of a sudden hit a supply chain. As there are no indications
of characteristically mysterious risks before their occasions really show up, we could contend that
they are not by any means risks. Risk infers probably some negligible learning of future occasions,
yet with characteristically mysterious risks we have finish obliviousness until the point when
something really occurs. Business coherence management is the main method for managing such
issues.
2. Time-subordinate risks just rise with the progression of time. Risk distinguishing proof can work
for the time being later on, and any risks past this time skyline stay covered up. These risks just
show up when they move into the noticeable time skyline.
3. Advancement subordinate risks rely upon the manner in which that tasks advance, and they just
show up when a specific measure of advancement has been made in a specific heading. So, these
rely upon both the progression of time and the heading in which the association moves. For
example, if administrators choose to acquaint more slender activities with their supply chain, a few
risks will rise when they have moved some path toward this path. Another factor here is that chiefs'
points of view will likewise change when they move one way, so their impression of risks will
likewise change.
4. Reaction needy or auxiliary risks just show up when move is made to react to a current
distinguished risk. So, the succession of occasions has a recognized risk, trailed by management
reaction, which at that point makes another risk. For example, chiefs may distinguish a risk from
material lack, so they react by expanding stocks, which builds the risks related with over the top
stock levels. Until the point that administrators make a move these risks don't exist, so they can't
be seen before the reaction is actualized. Aside from the innately mysterious risks, these depend
to some degree on time – as time proceeds onward, the risks change. This just fortifies our prior
notice that risk management isn't an occupation that is ever finished, however it is a proceeding
with process.

28 | P a g e
In all actuality, numerous risks don't abruptly show up yet develop after some time – especially
socio-political risks (challenges, strikes, new enactment, administrative changes, and so forth),
geopolitical shifts, (for example, the development of the European Association, the fall of the
previous Soviet Association, and the rise of China as a noteworthy exporter) and changing
financial conditions (cash fluctuations, business cycles, loan costs, and so on). Routine examining
of the business condition to distinguish the early indication of such changes is a basic piece of risk
management.
Risk recognizable proof is a perplexing procedure – and it is in no way, shape or form a correct
science. There is dependably the enormous number of conceivable risks, and additionally
mysterious ones, that we can't perceive and that show up suddenly. Utilizing formal techniques for
distinguishing proof, alongside customary audits, ought to limit the astonishments. What's more,
recollect that the option is to kick back and hold up until the point that you are hit by the
inescapable unexpected occasions that can make hopeless harm your activities.
1.12 Need to manage risk in supply chain:
The variety among Ericsson and Nokia feature the significance of overseeing danger. to position
it really, Nokia wound up composed to address sudden occasions, and Ericsson move toward
becoming not. % (2004) says that Nokia showed signs of improvement outcomes 'first because of
the reality its supply chain transformed into inalienably additional flexible than Ericsson's; second
because of the reality its risk personality, oversee and alleviation strategies have been vastly
improved; third because of the reality its operations have been sufficiently coordinated to answer
to the unforeseen'. This view demonstrates that three center components of supply chain risk
management are the plan of a flexible chain, techniques to oversee risk and spryness. in any case,
it is intriguing that even a main organization like Ericsson did not have methods in area for
overseeing risks in its supply chains.
The idea of overseeing risk isn't new. you can see proof for this when a protection enterprise
charges a best class for assuming control over a risk, or banks charge higher premium costs for
additional unpredictable advances. be that as it may, in most recent years risk management has
hoisted from its customary home in fund and the view that it's far a particular element done by
method for statisticians. as a substitute, it's far turning into a more extensive trademark this is
worried in most extreme choices, and is notwithstanding turning into an inherent a piece of
management. As open (1999) says, 'risk management isn't generally a different action from

29 | P a g e
management, it is control.' Maybe the principle reason for this development of risk control is the
conviction that venture is getting to be more prominent unpredictable. Chase (2001) says that both
the quantity of threats gone up against by organizations and their ability results are creating. This
was affirmed by means of a study from the Financial specialist Knowledge Unit (2001), which
verified that 'Numerous organizations comprehend an ascent inside the range and seriousness of
the risks they confront.' to some degree, this creating issue is a reaction to all around broadcasted
calamities – tremors, tidal waves, fear-based oppressor assaults, illnesses, mishaps, liquidations et
cetera. in any case, it additionally recognizes that organizations are helpless against little exercises.
while substantial movement defers conveyances, client’s stream to additional dependable
suppliers; when a web access fizzles, clients change to various organizations; while costs rise,
clients scan for circumstance items; a late installment makes a supplier support different
customers.
Indeed, even little exercises cumulatively affect an association's general execution and at last its
long-haul survival. Kleindorfer et al (2003) contemplated wounds inside the substance undertaking
and found that gigantic money related and ecological damage transformed into due to no longer
just essential fiascos like Bhopal and Exxon Valdez, yet additionally a huge number of adolescent
episodes that emerge routinely.
At that point it ends up crucial for managers to capture the perils of their typical work and find a
way to oversee them effectively.

30 | P a g e
1.13 Risk and its mitigations in food supply chain:
These are the types of risks which is found in supply chain of food which is as discussed below:

fig -9 Risks in food supply chain

1. production risks:
Production of food which is carrying out by every member along the food supply chain ,managers
of food supply chain admitted that production risks are the difficult ones to deal with there are lots
of uncertainties associated with them .They tried to strive on their capability to achieve a constant
high yield of flaw free perishable goods with delivery on time without customers dissatisfaction
and they should provide their performance as possible as at optimize cost. For Japanese products
of high quality is a necessary feature in the Japanese culture to be remain in the competition with
other industries or stay longer in the industries.
There are many sources of production risks that originate from their internal operation business.
machine haul or breakdown is a first main risk of production since, they are highly technologically
sophisticated. Secondly there are less numbers of workers available in Malaysia so, there is a labor
shortage problem to tackle this problem they have to depend on migrant workers for their works
and industrial expansions this will increase the labor costs as well. Third one is facility or storage
area to store the inventories. They have little limited space to accommodate the stocks.
For dealing with production risk, the Japanese style of management were recognized as success
factors to eliminate the production risks. To tackle the limited storage facility just in time (JIT)were
identified to helps in production and planning to reduce the risk. The 5 s methodology which was

31 | P a g e
given by Japanese for the improvement of manufacturing practices they are seiri (means to pick
up necessary things and remove the unnecessary from the workplace ) , seiton (to have neatness in
the organization so that everything should be placed at their location ), seiso (maintaining
cleaniness in the workplace ),seikestu ( it will helps the workers to maintain all the above three
‘S’), shitsuke (to maintain a self-discipline ). The all above 5 “s” are the daily routine of any
Japanese organization and it will maintain the organization hassle free and increase the
productivity of labor as it will not waste their time in searching for a tool because everything is
placed at their location hence, it will increase the efficiency of the worker. Japanese organization
are also used to play a kind of game called as “Gemba” to promote the workers so they are
automatically encouraged for their work and continuous improvement .The main idea behind the
game “Gemba” is to have vigilance over the shop floor activities to see how the production of
food is conducted and to understand the deep knowledge of the problem that has been occurred in
the manufacturing areas .While in the meantime ,managers of the company establish the close
relationship with the suppliers which is important to mitigate the production risks .That is because
of they are the keen observer and knowledgeable about the availability of raw materials ,how to
maintain raw material , how to maintain their freshness and proper techniques they provide the
valuable guidance .
2. Risk in Price purchase:
The raw food materials that are supplied to Japanese food company comes from a local supplier
as well as it was gathered by overseas .instead a very small percentage of food being imported by
overseas that will resulted in purchase price risk .the data which is collected from interview and
surveys shows that there are two origins of purchase price risk .The first is due to price instability
of the raw materials ,the prices may be go down and high , they are highly fluctuating in nature.
The food industries and the production industries rest on trading of raw materials like agriculture,
minerals and natural occurring substances in spite of variations in supply chain that might be occur.
The second risk is the cost which is associated which the imported materials that are gone through
foreign exchange rates. the reason behind the price hike ups is series of purchase international
purchasing always come up with that, organizations generally buy the materials in high volumes
which cost large monetary transactions. these transactions facing a greater risk due to currency
variation. the effects of purchase risk can be avoided by using the quantity and price lock strategy
in this strategy there is a mutual cooperation between the Japanese food company and beverages

32 | P a g e
companies with their suppliers about what should be the quoted price when the orders are placed
by Japanese food companies .The suppliers allow the Japanese companies to adjust their
manufacturing schedule before few months ago for employing the new prices because adverse or
drastic changes in the price of raw material vanish the production schedule of the Japanese food
companies so, there is a price lock strategy to reduce this effect. Instead, the suppliers are going to
charge first quoted price that was decided earlier or agreed between Japanese companies and
supplier up to the extreme quantity. Though having an authorized contract in which there is a
clearly mentioned of quoted prices are the best way to mitigate the risk. many organizations may
not go for this contract because they believe that have good relationships with the suppliers allow
them to take advantage of quantity lock strategy.
3. Risk in Demand:
Demand risk also the major risk which is associated with food supply chain that the Japanese
companies have to dealt with. and the two main reason which causes demand risk are:
uncertain and unpredictable changes in customer demands that will result into demand
fluctuations. the managers in the food industries believes that customer never stick upon a single
product they change their decision according to the innovation of new technology, low prices,
availability of that product so, it may be difficult to map their demands on regular basis.
The second main cause is lack of communication and coordination among the supply chain
members as there is wrong information sharing occurs between, they members the wrong numbers
of unit will be manufactured and that will result into bullwhip effect and when we try to fix it extra
efforts and money will be wasted, that will consume more time, more labor time, goodwill of
company may be in danger.
So, to mitigate this demand risk Japanese companies adopted a method to offset the risk by
increased communication across the supply chain through frequents updates and calculating
forecast with accuracy. To that degree that any forecast is inherently wrong and all the departments
are interconnected like sales databases and inventory. due to variation in the demand pattern the
product will be provided with a batch number .materials which go out or go in inside the
organization will be automatically recorded in the computer databases to track the level of sales,
deliveries and orders. If we monitor the materials flow along the supply chain efficiently may
reduce the chances of demand risk to be happened. at the same time team members makes links
with the marketing divisions and customer management team they are in the close relation with

33 | P a g e
the customers they are able to provide the critical data on sales projections and fulfilled the
customer demands this method gives a chance to match the demand with the supply.
4. Risk in Procurement:
One of the most important thing in the food company is to preserve the quality and edibility of
food as practitioner of food identified that food companies must preserve their food quality so that
their always looks good smells good and tastes good they buy the raw material from the same
supplier so as to maintain the integrity of food .If we wish to produce high quality products that
could be only produced by high quality raw materials that means to obtain a good quality of food
industries are highly dependent on their suppliers ,procurement risk is the major risk in the
Japanese food chain supply . Their effects can be mitigated through trade relations with the
suppliers in many conducts.
Firstly, having a loyal procurement supplier which supplies its good timely without any delay and
gets the right quality and quantity on time. Secondly, maintaining a close relationship with the
supplier so that it can share all the information related to the storage if raw materials so that its
freshness is maintained and preserving its quality. Thirdly, payment to the supplier should be in
timely manner so that relations on trade will be maintained it is very easy to manage the payments
because there are only few suppliers which are loyal .Lastly ,evaluations of suppliers on the basis
of performance yearly ,as said by Japanese company that an yearly evaluation is necessary for a
smooth flow of materials ,supply meet the demands .For that procurement department is integrated
to supply department to ensure that quality of materials are continuously evaluated so that suppliers
act according to the direction which was given to them.
5. Risk in Environment : That risk which is caused by external environment natural disaster
,political instability , terrorist attack, and economic downturns the all above factors contribute to
the environment risks and this risk may be disrupt the function of whole chain and the risk related
to natural disaster and terrorist attack given in (Kleindorfer and Saad, 2005; Tang, 2006; Knemeyer
et al., 2009; Noyan, 2012), economic downturns and political instability (Chopra and Sodhi,
2004).A few example are earthquake and tsunami in 2011 ,and shifting of tata motors
manufacturing plant in 2009 from eastern corner of India to the western corner due to political
instability they are some real cases which arises from government instability.
6. Risk in Structural: This risk arises due to lack of flexibility of network structure and which in
turn affects the normal operation of supply chain, supply chain is a complex wide network that

34 | P a g e
contains many interconnected nodes likes many supplies, marketing channels and enterprises with
different goals. supply chain management put more focus on system optimization, as the conflict
of personal goal will certainly arise flaws in the supply chain. structural risk contains friction risk,
restraint risk and flexible risk.
7. Risk in Information:
This risk arises due to unavailability of information about a product or get a distorted information
from a particular supply chain or not get the information at right time this will lead to information
risk as it will increase the lead time of a particular product and hence customer moves to another
distributor and the inaccuracy and delay of information will go on increase as the expansion of
food supply chain take place.
8. Risk in Cooperation:
It is the risk because of lack of cooperation among the partners if each unit of organization in the
supply chain coordinate with each other and they all work for the organization goal will
automatically bring the whole supply chain into a coordinate system , and enhance the organization
competitiveness and whole supply chain will benefit each other mutually .Each unit of
organization has their own independent interest ,they have freedom of opted and tacking back the
cooperation even the contract still exist ,due to self-interest partnerships failed .The disparity of
capital, information and logistics also exist .
9. Risk in Market: It is because of changes in demand and price of a market, there is a difference
between the actual and expected profit which will lead to uncertainties and change in economic
policy also It contains the character of periodic in nature, certainty, relevance, camouflage etc.

35 | P a g e
 Chapter -2
Literature review
2.1 Risk in supply chain:
The observed examination of supply chain and its risk management is broadly described in the
literature of the (Svensson, 2000; Zsidisin et al., 2004; Lockamy, 2011; Murugesan and Natarajan,
2013). To develop the knowledge of various kinds of risks in the supply chain, Rao and Goldsby
(2009) makes the categorization of risks. Tummala and Schoenherr (2011) gives the broad way to
manage risk in supply chain through managing approach. A risk management approach shows that
any kind of analysis in supply chain begin with identification of risk and proceed to risk measure,
risk valuation, risk preventive methods and monitoring of risk and their steps.
A final particular risk mitigation and their preventive methods stuck on their basic method of risk
assessment. and the consequences of different types of risk in supply chain and events conclude
“bearing area” of various kinds of risk (Chopra and Sodhi, 2004). SCRM contains many activities
like identification, assessment, controlling, analysis, monitoring and the recovery of the process
(Norrman and Jansson, 2004; Neiger et al., 2009). A modelling and conceptual knowledge in the
literature of SCRM is given by (Wieland,2013; El-Sayed et al., 2010; Goh et al., 2007;
Juttner,2005; Faisal et al., 2007; Chen and Xiao,2009; Noyan, 2012; Gurumurthy et al.,
2013).though a research gap is seen they did not show the interrelationship connectivity of various
kinds of risks and how to mitigate that risk there is no proper strategies mentioned in their
literature. An attempt is made to fill this gap by (surya Prakash, Gunjan soni, ajay pal Singh
Rathore, shubendersingh 2017) to acquire this gap they used to identify the various kinds of risks
in perishable food supply chain.
2.2 Risk in food supply chain:
Shukla and jharkharia (2013) they explanation of foods as which could be edible and which loses
its quality with time as for examples milk, many vegetable starts decaying after some time we
cannot store them for a long period of time Stanger et al. (2012) emphasize that store of perishable
items in stocks which causes risks in the supply chain , and by their literature paper found out the
critical factors of management of perishable food in the supply chain by taking an example of
blood inventory management process in hospitals . Rijpkema et al. (2014) gives as in case of short
life product design, and the risk related to their waste and their expected life is a material of
concern.

36 | P a g e
They put more pressure to reveal the risks for the supply chain of milk and their products which
are processed from milk. And they showed that study of dairy products is equally relevant and
important to other kinds of food supply chain because the factors they considered in the processed
food is kind of similar to food chain risks. and to determine the different types of risk in the
perishable foods they had taken a two-step process, in the first step they used the literature of
SCRM to find out the different types of risks in the perishable food and the cross-examination has
been done by taking data from the industry experts.
This kind of cross examination confirms that risk identification in that way are related to the
perishable foods. SCRM literature gives some typology and categorization for various kind risk in
the supply chain (Christopher and Peck, 2004; Rao and Goldsby, 2009). Generally , these risks
can be divided into two types: Risks that will arise from internal supply chain and risk that will
arise from external to it (Goh et al., 2007).they described supply chain risk into four parts named
as environmental risk, supply risk, demand risk, and process risk (Christopher and Peck, 2004;
Manuj and Mentzer,2008; Olson and Wu, 2010).they collected data from dairy expert along with
the expert opinion and try to identify various kind of risk that arises in milk and their processed
item by brainstorming. They include four types of risks in their study environment risk, supply
risk, demand risk, and process risk.
Risk in Environment: That risk which is caused by external environment natural disaster ,political
instability , terrorist attack, and economic downturns the all above factors contribute to the
environment risks and this risk may be disrupt the function of whole chain and the risk related to
natural disaster and terrorist attack given in (Kleindorfer and Saad, 2005; Tang, 2006; Knemeyer
et al., 2009; Noyan, 2012), economic downturns and political instability (Chopra and Sodhi, 2004).
Supply risk: In case of perishable food items they considered risk are supplier reliability (Norrman
and Jansson, 2004; Tummala and Schoenherr, 2011), ICT infrastructure (Chopra and Sodhi, 2004;
Wagner and Bode, 2008), supply quality and supplier capability (Lockamy, 2011). They have
taken the example of supply risks problem which is faced by nokia and Ericson which is explained
in Norrman and Jansson (2004).
Risk in Demand: When we have several varieties of that product (Tang and Tomlin, 2008).
Demand risk (Wu et al., 2006; Manuj and Mentzer, 2008) ascends due to customer immigration,
market segment establishment, inaccurate information sharing by retailers or point of sales (POS)

37 | P a g e
data fault (Wagner and Bode, 2008) and risk due to forecast error (Chopra and Sodhi, 2004; Wu
et al., 2006).
Risk in process: Technological changes in plant and product quality (Wu et al., 2006), production
issues, transportation issues and labor issues (Chopra and Sodhi, 2004; Wu et al., 2006; Tummala
and Schoenherr, 2011). conceptual and mathematical modelling (Nagurney et al., 2005; Tomlin,
2006; Ganguly and Guin, 2013), and that helps in framing the suitable risk mitigation strategies.
In SCRM literature, many numbers of tools and practices are being used by scholars for examining
risks, for example, failure mode effect analysis (FMEA) (Andre and Miguel, 2008; Pradhan and
Routroy, 2014) and analytical hierarchy process (Cagliano et al., 2012; Prakash et al., 2014). ISM
(Harary et al., 1965; Warfield, 1974) is extensively used by many scholars in their practices for
analyzing the risk in supply chain. they have evaluated risk by using ISM approach. The
mathematical modelling and theoretical vital knowledge about this approach was discussed in
Harary et al. (1965) and Warfield (1973). That technique gets popularity in late 91s and had applied
in various areas like vendor selection (Mandal and Deshmukh, 1993), IT enactment in SCM
(Jharkharia andShankar, 2004), SCRM (Faisal et al., 2006), modeling of supply chain risks (Pfohl
et al., 2011), risk mitigation (Diabat et al., 2012), etc. Newly, an article by Soni et al. (2014) has
used ISM on the measurement of supply resilience to estimating enablers their relationship for
supply chain resilience. A background to designing rigid food supply chains that is deliberated
through Vlajic et al. (2014). But there is some limitation to this study like, they neglect the other
factors also which caused disruption to the supply chain management as for example structural
risk, cooperation risk, market risk and information risk.
Thousands of people may die on daily basis due to contaminated food if the farmers use more
chemical additive to increase their demand the lives of people may be in danger it should be
stopped by government regulation policy. Farmers may add concoction added substances to yields
to improve their appearances/tastes or reduction their expenses, which may likewise build the
sustenance request and deals benefits. Makers purchase items from agriculturists and pitch them
to buyers, where the administration profits by assessment pay dependent on deals revenues.
However, when the tainted nourishment is expended, clients could become ill. The administration
would, along these lines, be in part in charge of society's wellbeing dangers from the substance
added substances. The discipline arrangements are set up by the administration to manage and
prevent ranchers' and makers' dangerous conduct, adjusting charge wage, discipline wage, and

38 | P a g e
society's wellbeing dangers. In view of the perception of government directions, the ranchers
deliberately pick the ideal level of concoction added substances, and producers pay the fitting cost
to agriculturists. As far as anyone is concerned, little work has examined the vital cooperation
among the directing government, producers, and ranchers with endogenous client request. Many
researchers had given their opinions to control the contamination of food. Sustenance tainting
episodes could get from the administration's absence of directions, disciplines, and assets to uphold
sustenance wellbeing (Ellis and Turner, 2010; Ming, 2006; Zacha, Doyleb, Bierc, and
Czuprynskib, 2012). For the security of the (nourishment) production network, numerous
proposals on government controls are proposed: (a) The joint utilization of risk and security
direction (Shavell, 1984)); (b) Fines what's more, restorative charges (Kambhu, 1990); (c) a higher
review exactness what's more, more grounded authorization (Cheung and Zhuang, 2012;
Goodness, 1995); (d) The inconvenience of obligation for harms (Segerson, 1999); (e) Exchanging
expenses and advantages from the administration to the makers utilizing punishment contracts
(Hobbs and Kerr, 1999); also, (f) Exchanging security disappointment costs from the
administration to the makers (Chen, 2009). This paper centers around the administration's
discipline and assessments. There exist key associations among organizations and the managing
government in the current writing (Tompkin, 2001). For instance, (Rose-Ackerman, 1991)
recommends coordinate direction and item obligation that can make motivating forces for
organizations to control nourishment quality. (Henson and Caswell, 1999) out that the normal
financial advantages and costs influence an association's reaction to the legislature direction. The
organizations' advantages and expenses are estimated for enhancing nourishment quality and
wellbeing in quality administration frameworks in (Caswell, 1998). (Charges and Rouviere, 2010)
finds that the organization's choice of utilizing added substances relies upon its own costs (e.g.,
nourishment decay and dangers) and advantages (e.g., profitability improvement), with or without
confronting the administration direction. Vital communications among organizations and the
administration are not new, e.g., (Pouliot and Sumner, 2008) dissects the nourishment wellbeing
what's more, quality issues from the point of view of traceability in an advertising chain made out
of ranchers, advertisers and purchasers. And to control the contaminated food they developed a
model of government-manufacturer-farmer (cen song and jun Zhuang ,2017) ponders a two-player
government-producer amusement where the producer could include synthetic concoctions.
Notwithstanding, practically speaking there might exist a third player (e.g., agriculturist) who

39 | P a g e
include synthetic added substances. Consequently, this paper expands (song and Zhuang, 2017)
by breaking down the key associations among the directing government, producers, and
agriculturists considering endogenous clients' requests with regards to nourishment production
network chance administration. Since Sanlu case is considered as nourishment extortion, this paper
dissects the hazardous practices of agriculturists and producers from a monetary route known as
financially persuaded defilement (EMA, see (Moore, Spink, and Lipp, 2012)). Specifically, we
consider a successive amusement where the administration, the principal player, sets the discipline
approaches for makers what's more, ranchers, adjusting charge salary, discipline pay furthermore,
societal expense. The producer, as the second mover, pays the agriculturist dependent on the
perceptible government discipline data, adjusting discipline, assess expenses, and deals incomes.
The agriculturist, as the third mover, watches the discipline and installment data and picks the
substance level, adjusting discipline, substance and generation costs, and the business income to
the agriculturist., our recommendation is: (a) The discipline to the rancher ought not be too low to
stop agriculturist's dangerous conduct; and (b) The discipline to the maker ought not be too high,
else it would influence the rancher's profit by the maker's installment to the agriculturist, and lead
rancher to include substance added substances. The affectability investigation of harmony
procedures demonstrates that the legislature can use the expense rate to diminish the compound
level. One decentralized Government versus Producer versus Rancher (GvMvF) model and two
brought together (Government-Maker Agriculturist GMF, and the Administration versus Rancher
Maker GvMF) models are examined. This paper applies the genuine information from the 2008
Sanlu drain powder defilement case to the three models. We exhibit that (a) The ideal compound
level in the brought together GMF display is higher than that in the decentralized GvMvF show,
particularly when the sustenance cost and the slant for deals sum are high, or the base deals request,
charge rate, creation cost, and compound expense are low; and (b) The ideal synthetic level in the
concentrated GvMF show is higher than that in the decentralized GvMvF display, particularly
when the nourishment cost and the slant for sum are high, or when the expense rate, disorder slant,
coefficient of society cost, creation cost and compound expense are low. At long last, we analyze
every one of the three models and discover the decentralized GvMvF display prompts the most
reduced substance level and ailment likelihood, the GvMF display prompts the most noteworthy
government utility, and the unified GMF show prompts the most noteworthy social utility and the
most elevated deals sum. This implies the legislature ought not coordinate with the rancher for the

40 | P a g e
lower utilization of compound added substances and affliction likelihood. Also, the rancher ought
not coordinate with the producer for the lower ailment likelihood and government's discipline.
This paper exhibits the starting point reason for the agriculturist's hazardous conduct and
immediate and roundabout impact of the maker and government's conduct choices. It gives some
novel government discipline arrangement bits of knowledge and agriculturist/maker procedures
for the sustenance production network chance administration. It could give some administrative
bits of knowledge for makers on the installment to the rancher and regardless of whether to control
the nature of drain. Some future research bearings include: (a) considering the government impose
arrangement as a choice variable influencing the makers' furthermore, agriculturists' unsafe
practices; (b) demonstrating the ranchers' furthermore, producers' non-vital practices; (c)
dissecting the rivalries between makers or among ranchers; and (d) thinking about the distinctive
impacts of concoction added substances on the nourishment's dying rate in a dynamic model.
2.3 Risk analysis and its mitigation strategies:
Risk analysis of food which is based on system dynamics was given by (Mei and Hehua fan ,2011)
This category of research for risk management in food supply chain is giving more emphasis to
quantitative analysis but there is a insufficiency of data and the relationship between some
parameters are difficult to measure is one of tacky subject in research and the model they used for
system dynamics is based on feedback loop ,research shows that many feedbacks in the system
makes a system pattern insensitive to insignificant parameters of model as far as assessment of
parameters within their limits then the unreasonable pattern will not be shown by the system .So,
in the absence of data system dynamics helps to solve the issues regarding food supply chain risk
management. System dynamics is a type of model which is based on feedback mechanism,
behavior pattern of system determined by their inner structure. they set the length of simulation to
see the changes in the systems long term behavior. the food supply risk is also a long-term issue,
and go with supply chain in whole life cycle. Many converging points have been identifying in the
above analysis of food supply risk management, the system dynamics is an effective tool to study
food supply risk management.
Food supply chain largely depend on environment, delivery cycles, storage requirement and
transportation, huge uncertainty of the market, good quality etc. In adding industries of food
expanded and become more and more complicated and therefore chances of happening of risk has
been increased after the examination of food supply risk, they recapitulate and present the seven-

41 | P a g e
food supply risk [3]: quality risk, logistics and inventory control risk, structural risk, information
risk, cooperation risk, market risk and environmental risk.
All supply chain is not the same some large supply chain, some short supply chain. large supply
chain usually more complex than the smaller one hence, different supply chain has different kind
of risk and the outcomes due to different risk factors is also different in their literature paper they
showed that quality risk is the most influencing factor and it is a key risk factor by using dynamical
assessment of food supply chain.
Therefore, food supply chain management must use the way of risk awareness, seek out for
optimization of strategy, techniques and tools, acknowledgement, operation flow, and man power
resources on supply chain, and try to make coordination between the members of supply chain by
identification, assessment, control and feedback loop system. by using all these strategies, they try
to relieve or eliminate risk from the supply chain.
A study has been conducted by Japanese food company in Malaysia to mitigate the risk factors in
food supply chain. for the Malaysian economy food processing is the major backbone of their
economy, which accounts for 11% of the Malaysia manufacturing output (MIDA 2012). total
processed food contribute towards the economy is RM14.3 billion, and the exports of the food
products were more than 250 countries.
Though exports have been more than doubled over the last past decades, and at that stage Malaysia
is a net importer of processed food with an annual revenue of more than RM37 billion in 2013
(MIDA 2015). Malaysia has been experienced that situation from the last two decades. The only
cause of food trade imbalance in Malaysia is the presence of small medium sizes organizations
fronting various opportunities which weaken the production ability. Small medium sizes
organizations are highly dominated in food sector at Malaysia that accounted for more than 97%
of the industry .The main cause that SMEs are facing are obsolete methods ,not efficient quality
of raw material and their sub parts ,no innovation in the product design and no research has been
done to improve the process at factory level .The mode of operation of SMEs are of small level
that have resulted in incompetent to produce or make constant volumes of output and that will
result into unfulfilled demand.as the problem mentioned above Japanese companies were not able
to provide the rising demand and demands go unfulfilled that gives an negative impact on their
trade market of edible food and products .after seeing the major contribution of food organization
toward the economy of Malaysian government , the Malaysian government wants to improve the

42 | P a g e
food sector by making more growth in local food processing .Malaysian government act on the
inability of food processing sector for not producing product efficiently they continuously support
the integration in the supply chain as brought to us Third Industrial Master Plan (2006–2020
Japanese food company that are running in Malaysia considering there are four potential risks
(Razdi,Saidon, and Ghani 2017) that affects the food supply chain negatively and hence in turn
brings the economy of organization to bottom these are production,procurement,price purchase,
and demand .by gathering data from the managers of Japanese companies in Malaysia ,they has
provided some useful facts that how Japanese companies cope with that four kinds of risks .
Production risks: There are many sources of production risks that originate from their internal
operation business. machine haul or breakdown is a first main risk of production since, they are
highly technologically sophisticated. Secondly there are less numbers of workers available in
Malaysia so, there is a labor shortage problem to tackle this problem they have to depend on
migrant workers for their works and industrial expansions this will increase the labor costs as well.
third one is facility or storage area to store the inventories. They have little limited space to
accommodate the stocks.
For dealing with production risk, the Japanese style of management were recognized as success
factors to eliminate the production risks .to tackle the limited storage facility just in time (JIT)were
identified to helps in production and planning to reduce the risk. The 5 s methodology which was
given by Japanese for the improvement of manufacturing practices they are seiri (means to pick
up necessary things and remove the unnecessary from the workplace ) , seiton (to have neatness in
the organization so that everything should be placed at their location ), seiso (maintaining
cleanliness in the workplace ),seikestu ( it will helps the workers to maintain all the above three
‘S’), shitsuke (to maintain a self-discipline ). The all above 5 “s” are the daily routine of any
Japanese organization and it will maintain the organization hassle free and increase the
productivity of labor as it will not waste their time in searching for a tool because everything is
placed at their location hence, it will increase the efficiency of the worker. Japanese organization
are also used to play a kind of game called as “Gemba” to promote the workers so they are
automatically encouraged for their work and continuous improvement .The main idea behind the
game “Gemba” is to have vigilance over the shop floor activities to see how the production of
food is conducted and to understand the deep knowledge of the problem that has been occurred in
the manufacturing areas .While in the meantime ,managers of the company establish the close

43 | P a g e
relationship with the suppliers which is important to mitigate the production risks .That is because
of they are the keen observer and knowledgeable about the availability of raw materials ,how to
maintain raw material , how to maintain their freshness and proper techniques they provide the
valuable guidance .
Price purchase risk:
The data which is collected from interview and surveys shows that there are two origins of
purchase price risk. the first is due to price instability of the raw materials, the prices may be going
down and high, they are highly fluctuating in nature. The food industries and the production
industries rest on trading of raw materials like agriculture, minerals and natural occurring
substances in spite of variations in supply chain that might be occur. The second risk is the cost
which is associated which the imported materials that are gone through foreign exchange rates. the
reason behind the price hike ups is series of purchase international purchasing always come up
with that, organizations generally buy the materials in high volumes which cost large monetary
transactions. These transactions facing a greater risk due to currency variation. The effects of
purchase risk can be avoided by using the quantity and price lock strategy in this strategy there is
a mutual cooperation between the Japanese food company and beverages companies with their
suppliers about what should be the quoted price when the orders are placed by Japanese food
companies .The suppliers allow the Japanese companies to adjust their manufacturing schedule
before few months ago for employing the new prices because adverse or drastic changes in the
price of raw material vanish the production schedule of the Japanese food companies so, there is a
price lock strategy to reduce this effect. Instead, the suppliers are going to charge first quoted price
that was decided earlier or agreed between Japanese companies and supplier up to the extreme
quantity. though having an authorized contract in which there is a clearly mentioned of quoted
prices are the best way to mitigate the risk. many organizations may not go for this contract because
they believe that have good relationships with the suppliers allow them to take advantage of
quantity lock strategy.
Demand risk:
The two main reason which causes demand risk are:
Uncertain and unpredictable changes in customer demands that will result into demand
fluctuations. the managers in the food industries believes that customer never stick upon a single

44 | P a g e
product they change their decision according to the innovation of new technology, low prices,
availability of that product so, it may be difficult to map their demands on regular basis.
The second main cause is lack of communication and coordination among the supply chain
members as there is wrong information sharing occurs between the members, the wrong numbers
of unit will be manufactured and that will result into bullwhip effect and when we try to fix it extra
efforts and money will be wasted, that will consume more time, more labor time, goodwill of
company may be in danger.
So, to mitigate this demand risk Japanese companies adopted a method to offset the risk by
increased communication across the supply chain through frequents updates and calculating
forecast with accuracy. To that degree that any forecast is inherently wrong and all the departments
are interconnected like sales databases and inventory. due to variation in the demand pattern the
product will be provided with a batch number. Materials which go out or go in inside the
organization will be automatically recorded in the computer databases to track the level of sales,
deliveries and orders. If we monitor the materials flow along the supply chain efficiently may
reduce the chances of demand risk to be happened. At the same time team members makes links
with the marketing divisions and customer management team they are in the close relation with
the customers they are able to provide the critical data on sales projections and fulfilled the
customer demands this method gives a chance to match the demand with the supply.
Risk in Procurement:
One of the most important thing in the food company is to preserve the quality and edibility of
food as practitioner of food identified that food companies must preserve their food quality so that
their always looks good smells good and tastes good they buy the raw material from the same
supplier so as to maintain the integrity of food .If we wish to produce high quality products that
could be only produced by high quality raw materials that means to obtain a good quality of food
industries are highly dependent on their suppliers ,procurement risk is the major risk in the
Japanese food chain supply . Their effects can be mitigated through trade relations with the
suppliers in many conducts.
Firstly, having a loyal procurement supplier which supplies its good timely without any delay and
gets the right quality and quantity on time. Secondly, maintaining a close relationship with the
supplier so that it can share all the information related to the storage if raw materials so that its
freshness is maintained and preserving its quality. Thirdly, payment to the supplier should be in

45 | P a g e
timely manner so that relations on trade will be maintained it is very easy to manage the payments
because there are only few suppliers which are loyal .Lastly ,evaluations of suppliers on the basis
of performance yearly ,as said by Japanese company that an yearly evaluation is necessary for a
smooth flow of materials ,supply meet the demands .For that procurement department is integrated
to supply department to ensure that quality of materials are continuously evaluated so that suppliers
act according to the direction which was given to them.

46 | P a g e
 Chapter -3
Research methodology
In this dissertation the objective of work was achieved by the methodology of Analytical hierarchy
process (AHP). The detailed discussion on AHP is as follows.

Literature review on enablers in food

supply chain for the implementation of
AHP

Collection of enablers from literature

Questionnaire development and data

collection

Results and Discussions

Conclusion

Fig:10 Methodology of study

47 | P a g e
Analytical hierarchy process (AHP)

The Analytical hierarchy Process was first created by Saaty (1980). It is a technique for solving
complex and unstructured complications that may or may not have interactions and correlations
among different objectives and goals. It delivers an operative methodology in order to solve
complex and complicated decision-making and can also help in classifying and weighing criteria,
analysing the data and information composed and proceeding the decision- making process. AHP
is developed to solve intricate problem into different levels of hierarchy with objective/goal in the
top, while the criteria and sub-criteria comes at intermediate, and the lowest level represents
alternatives (Saaty, 1980). The AHP is a theory of measurement through pair-wise comparisons
and relies on the judgements of experts to derive priority scales (Saaty, 2008). AHP progresses
priorities among all the criteria and sub-criteria within each level of the hierarchy. AHP method
established substantial consideration among decision makers and has demonstrated its
applicability in different fields, such as maintenance policy selection. The latter is more deeply
illustrated in the introduction section. However, this method can also be utilized in many other
fields.
The AHP is an actually very supple and prevailing method because the scores, and the closing
ranking, are attained with the help of the pairwise relative evaluations of both the criteria and the
options given by the operator. The calculations and output given by the AHP are guided by the
person who is making the decision. The effectiveness of the result depends on the experience and
the involvement of the decision maker. The results or the computations given by the decision
maker could be qualitative or quantitative, AHP works in both ways, it converts the decision into
ranking and weights. Also, the AHP is not very difficult, it is a multicriteria decision making tool
which can be applied easily and effectively, we don’t require complex framework and team of
complicated expert system. The decision maker has to compare the given criteria with each other
and assign the ranking accordingly. On the other hand, the AHP may require a large number of
evaluations by the user, especially for problems with many criteria and options. Though each
evaluation is identical simple, since it only requires the decision maker to express how two
options or criteria compare to each other, the load of the evaluation task may become
unreasonable. In fact, the number of pairwise comparisons grows quadratically with the number
of criteria and options. For example, when comparing 10 alternatives on 4 criteria, 4·3/2=6
comparisons are requested to build the weight vector, and 4· (10·9/2) =180 pairwise comparisons

48 | P a g e
are needed to build the score matrix. However, the avoid confusion and workload of decision
maker AHP can be performed automated fully or partially.

What is Pair wise comparison?

Pair wise comparison is a method of analysing two given criteria. It makes comparison between
two criteria’s and give judgement about which one is more suitable and how much. To illustrate,
we can take and example, let us suppose we need to compare between two mobile phones, Apple
and Samsung, then to make the judgement we would ask the decision maker that which mobile
phone brand the decision maker prefers and how much on scale of 1 to 9.

Step 1: Identification of enablers in food supply chain

15 enablers which plays important role in food supply chain are being selected from various
research papers and review papers. The enablers with their description are given in the following
table.

Table:1 Enablers to food supply chain

ENABLERS DESCRIPTION SOURCE

1. Proper use of irrigation (PI)
2. Demographical and
environmental conditions (DE)
3. Risk analysis (RA)
4. Information technology
Biosensors (IT)
5. Government policies (GP)
It is used for the protection from
microbiological contamination
in fruits and vegetables
It directly affects the security of
food as the population is
increasing day by day the
demands for food is also
increased
To reduce the wastage or
deterioration of food products, it
is important to assess their risks
which in turn will be useful for
improving the quality of food.
It is used for food safety and
makes the system easier and
more effective and beneficial for
implementing SFSCM
Government has taken many Lele, U., M. Klousia-Marquis,
preventive measures for and S. Goswami. "Good
Du Plessis, Erika, and Lise
Korsten. "Irrigation and food
safety: feature." Water Wheel
14.4 (2015):
Thomas, Kevin JA, and Tukufu
Zuberi. "Demographic Change,
the IMPACT Model, and Food
Security in Sub-Saharan Africa."
UNDP Regional Bureau for
Africa Working Paper (2012).
US Department of Health and
Human Services. "Food safety
and security: Operational risk
management systems approach."
Food Safety and Security, ORM
Systems Approach, US FDA
Center for Food Safety and
Applied Nutrition (2001).
(McMeekin, 2007; McMeekin
et al., 2006; McMeekin and Ross,
1996).

49 | P a g e
 increasing quality of food which
includes many Government
policies. Government plays an
important role in achieving food
security.
6. Fingerprinting (FP) Fingerprinting is used for
detecting contaminants in food
by using many techniques like
FTIR, SERS etc.
7. Packaging (PG) It is used to enhance the food
security and safety and also
minimizes the risk of
contamination.
8. Transportation (TR) The majority of food is wasted
during transportation annually.
Proper use of refrigeration,
loading devices and tracking
technologies will increase the
safety and security of food.
9. Implementation of green Green food is used to maintain
food (IG) the standards without harming
the environment and reduces the
effect of pollution.
50 | P a g e
governance for food, water and
energy security." Aquatic
procedia 1 (2013)
Zhang, Jia, et al. "Review of the
current application of
fingerprinting allowing detection
of food adulteration and fraud in
China." Food Control 22.8
(2011):
Yam, Kit L., Paul T. Takhistov,
and Joseph Miltz. "Intelligent
packaging: concepts and
applications." Journal of food
science 70.1 (2005).
Marsh, Kenneth, and Betty
Bugusu. "Food packaging—
roles, materials, and
environmental issues." Journal
of food science 72.3 (2007):
Kim, Hyoun-Wook, et al.
"Overview of the management
characteristics of food (livestock
products) transportation systems
on international and national-
level HACCP application."
Korean Journal for Food
Science of Animal Resources
29.4 (2009): 513-522.
Ackerley, Nyssa, Aylin
Sertkaya, and Rachel Lange.
"Food transportation safety:
characterizing risks and controls
by use of expert." Food
protection trends 30.4 (2010)
Cheng, Rong. "Strategy
Research on Development of
Green Food and Security Control
in Heilongjiang Province." IERI
Procedia 8 (2014):
Mangla, Sachin K., Pradeep
Kumar, and Mukesh Kumar
Barua. "Flexible decision
modeling for evaluating the risks
in green supply chain
using fuzzy AHP and IRP
methodologies." Global Journal
of Flexible Systems Management
16.1 (2015).
 10.Good relation with supplier To mitigate the effect of Radzi, R. M., & Saidon, I. M.
procurement risk (2015).
11.Just In Time To reduce the effect of Radzi, R. M., & Saidon, I. M.
production risk (2015).
12. Food traceability systems to comply with mandatory (Dabbene et al., 2014). Saak
(FTSs) regulations, to attest product (2016)
origin, to certify specific food
properties, and to aid recall
actions in case of sanitary
outbreaks
13.Effecient monitoring To reduce the effect of demand Radzi, R. M., & Saidon, I. M.
risk (2015).
14. Hygiene and protective no dust, dirt, rotting garbage, Ababio, P. F., & Lovatt, P.
management dirty water, direct sun (2015).
15.price volatility strategies 1. survive -Substitute or cut Assefa, T. T., Meuwissen, M. P.,
production. & Lansink, A. G. (2017).
2.Adapt - Closely follow market
development, improve price
predictions and concentrate
production in high price weeks
(ST, DT)
3.control - Fixed price forward
contract for inputs (DC, GP)
4.Hedge- Use average seasonal
price offered by cooperatives
(FW)

Step 2: Pairwise comparison matrix

Pairwise comparison matrix is developed, the enablers are compared pair wise on a scale of 1 to
9.
As the number of criteria are 15, there will be 105 comparison by the formula
Number of comparisons = n(n-1)/2
Where n = number of criteria to be analysed.
The 1 to 9 scale is as follows:

51 | P a g e
Table:2 Scale of relative importance (According to Saaty, 1980)

Intensity of importance Definition Explanation

1 Equal importance Two activities contribute equally

to the objective

3 Weak importance one over other Experience and judgement

slightly favour one activity over
other
5 Essential or strong importance Experience and judgement
strongly favour one activity over
other
7 Demonstrated importance An activity is strongly favoured
and its dominance
demonstrated in practice
9 Absolute importance The evidence favouring one
activity over another is of the
highest possible order of
affirmation
2,4,6,8 Intermediate values between the When compromise is needed
two adjacent judgements

Reciprocals of above non If activity i has one of the above

zero non zero numbers assigned to it
when compared to activity j, then j
has reciprocal value when
compared to i.

52 | P a g e
 Fig-11 criteria comparison matrix
Step 2: Based on questionnaire survey or your own paired comparison, we make several
comparison matrices. Now we will calculate Normalized matrix by dividing each element of
the column matrix by the column total.

53 | P a g e
 Fig-12 Normalized matrix
Step 3: Calculate the criteria weight by calculating the average of the row

Fig-13 criteria weight

Consistency Index (CI) and Consistency Ratio(CR)

After getting the weighted matrix we need to check the consistency of the obtained matrix, we
need to check the consistency of the subjective judgment. The consistency check is required to
ascertain the validity of the matrix obtained.

54 | P a g e
The for consistency is given by Prof. Saaty proved that for consistent reciprocal matrix, the largest
Eigen value is equal to the number of comparisons, or . Then he gave a measure of
consistency, called Consistency Index as deviation or degree of consistency using the following
formula

After receiving the consistency index, the next step is to know how to use that consistency index.
To use the consistency index, we need appropriate consistency as proposed by Prof. Saaty. The
appropriate consistency index is called random consistency index.

Prof. Saaty randomly generated reciprocal matrix using scale , , …, , …, 8, 9 (similar to the
idea of Bootstrap) and get the random consistency index to see if it is about 10% or less

The average random consistency index up to 15 attributes are as follows:

Fig -14 Randomness Index

So according to Saaty, consistency ratio, which is comparison between consistency index and
random index can be given by the formula:

55 | P a g e
If the value of Consistency Ratio is smaller or equal to 10%, the inconsistency is acceptable. If the
Consistency Ratio is greater than 10%, we need to revise the subjective judgment.

To calculate CI we need a consistency Average matrix which can be calculated as:

Consistency vector =[WS]/[W]
Where WS = weight sum vector
W=Criteria weight
WS can be calculated as
[WS]=[C][W]

Fig- 15 Consistency Average

For our problem CI is calculated from the above formula and it is 0.1577 and CR will be 0.099
(by the formula CI/RI)
Thus, Subjective evaluation of criteria preference for our problem is consistent since it is 9.9%
Which is less than 10%.
So far, in AHP we are only dealing with paired comparison of criteria which come out to be
consistent.

56 | P a g e
 Chapter -4
Result and Discussion
The relative weights which was given using AHP is the criteria to assign rankings to those enablers
which will be used in food industries to improve their practices and helps to lessen the risk

Fig-16 Ranking of Enablers

The order of the rankings is as given in the table after using the priorities one can implement
successfully it in food supply chain management. following the table one can find enabler
7(packaging) is the most important enabler in food industries and ranks first among the rest .as we
know that most of the bacteria and contaminants attacks the food particle if the packaging of the
food is not good .it is very important when it comes to hospitals and health related issues.it helps
to maintain freshness and cleanliness of the food .therefore in food industries more emphasis must
put on this enabler.
Proper use of irrigation hold second most position as if we used the polluted water for irrigation it
affects the purity and freshness of food and directly and indirectly affects the farmers and
consumers when the ground water gets polluted the hazard to irrigation will increase.
Information technology holds the third position it will helps to detect the adulterated food if any it
is used to implement sustainable food practices in food industries.

57 | P a g e
 Chapter -5
Conclusion
Now a day’s safety and security are the biggest challenge in the food industries, as the awareness
among people is increased, due to government regulation, food industries must have to provide
sustainable food supply chain.
In this paper 15 enablers were identified analyses them, assign weight and ranking using AHP
method this paper provides the awareness among the supply chain mangers to improve their
method of practice specific mitigation strategies can be applied to reduce the intensity of risk. the
most important enabler is packaging as compare with other enablers. Some other techniques which
can also be used to rank or analyses those enablers.
The limitations of our study are the subjectivity of experts involved in decision making which
means that different people have different opinions and different scales of judgments and this may
lead to conflicts and sometimes error in analysis. Although I have got the consistency 0.99(9.9%)
but the real requirement consistency should be 0% but due to variations in the judgements and
opinions there is a minimum allowed value of consistency is practiced.
Also, other methodology can also be applied like industry case studies, operation research which
are untouched.

58 | P a g e
References:

Chopra, S. and Sodhi, M.S. (2004), “Managing risk to avoid supply-chain breakdown”, MIT Sloan

Management Review, Vol. 46 No. 1, pp. 53-61.

Christopher, M. and Peck, H. (2004), “Building the resilient supply chain”, International Journal

of Logistics Management, Vol. 15 No. 2, pp. 1-13.

Faisal, M.N., Banwet, D.K. and Shankar, R. (2007), “Information risks management in supply

chains: an assessment and mitigation framework”, Journal of Enterprise Information Management,

Vol. 20 No. 6, pp. 677-699.

Gurumurthy, A., Soni, G., Prakash, S. and Badhotiya, G.K. (2013), “Review on supply chain

Hudnurkar, M., Deshpande, S., Rathod, U., & Jakhar, S. K. (2017). Supply Chain Risk
Classification Schemes: A Literature Review. Operations and Supply Chain Management: An
International Journal,182. doi:10.31387/oscm0290190
International Journal of Production Economics, Vol. 116 No. 1, pp. 12-27.
International Journal of Productivity and Performance Management, Vol. 53 No. 8, pp. 700-712.

Jharkharia, S. and Shankar, R. (2004), “IT enablement of supply chains: modeling the enabler,

Juttner, U. (2005), “Requirements from a practitioner perspective supply chain risk management:

Kleindorfer, P.R. and Saad, G.H. (2005), “Managing disruption risks in supply chains”, Production

and Operations Management, Vol. 14 No. 1, pp. 53-68.

Liu, M., & Fan, H. (2011). Food supply chain risk assessment based on the theory of system
dynamics. 2011 2nd International Conference on Artificial Intelligence, Management Science and
Electronic Commerce (AIMSEC). doi:10.1109/aimsec.2011.6010236

management research – an Indian perspective”, IIM Kozhikode Society & Management Review,

Management, Vol. 44 No. 6, pp. 494-510.

Norrman, A. and Jansson, U. (2004), “Ericsson’s proactive supply chain risk management

approach after a serious sub-supplier accident”, International Journal of Physical Distribution and

Logistics Management, Vol. 34 No. 5, pp. 434-456.

59 | P a g e
perishable product supply chains”, International Journal of Physical Distribution & Logistics

Prakash, S., Soni, G., Rathore, A. P., & Singh, S. (2017). Risk analysis and mitigation for
perishable food supply chain: A case of dairy industry. Benchmarking: An International
Journal,24(1), 2-23. doi:10.1108/bij-07-2015-0070
Radzi, R. M., & Saidon, I. M. (2015). Overcoming barriers of food supply chain in Malaysıa by Japanese
food companies. Pressacademia,2(3), 380-380. doi:10.17261/pressacademia.2015312987

Rao, S. and Goldsby, T.J. (2009), “Supply chain risks: a review and typology”, The International

Journal of Logistics Management, Vol. 20 No. 1, pp. 97-123

Rijpkema, W.A., Rossi, R. and van der Vorst, J.G.A.J. (2014), “Effective sourcing strategies for

Shukla, M. and Jharkharia, S. (2013), “Agri-fresh produce supply chain management: a state-of-

the-art literature review”, International Journal of Operations & Production Management, Vol. 33

No. 2, pp. 114-158.

Song, C., & Zhuang, J. (2017). Modeling a Government-Manufacturer-Farmer game for food
supply chain risk management. Food Control,78, 443-455. doi:10.1016/j.foodcont.2017.02.047

Tang, C. and Tomlin, B. (2008), “The power of flexibility for mitigating supply chain risks”,

Tomlin, B. (2006), “On the value of mitigation and contingency strategies for managing supply

chain disruption risks”, Management Science, Vol. 52 No. 5, pp. 639-657.

understanding the business requirements”, The International Journal of Logistics Management,

Vanany, I., Zailani, S., & Pujawan, N. (n.d.). Supply Chain Risk Management. Supply Chain
Optimization, Management and Integration,15-32. doi:10.4018/978-1-60960-135-5.ch002
Vol. 16 No. 1, pp. 120-141.
Vol. 2 No. 1, pp. 1-19.

Wagner, S.M. and Bode, C. (2008), “An empirical examination of supply chain performance along

several dimensions of risk”, Journal of Business Logistics, Vol. 29 No. 1, pp. 307-325.

Waters, C. D. (2015). Supply chain risk management: Vulnerability and resilience in logistics.
London: Kogan Page.

60 | P a g e