Risk And Resilience Value Article
Risk And Resilience Value Article
Supply Chain Management: An International Journal Risk and resilience in agri-food supply chains: the case of the ASDA PorkLink supply chain in Scotland Philip Leat, Cesar Revoredo‐Giha,
Article information: To cite this document: Philip Leat, Cesar Revoredo‐Giha, (2013) “Risk and resilience in agri‐food supply chains: the case of the ASDA PorkLink supply chain in Scotland”, Supply Chain Management: An International Journal, Vol. 18 Issue: 2, pp.219-231, https://doi.org/10.1108/13598541311318845 Permanent link to this document: https://doi.org/10.1108/13598541311318845
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Risk and resilience in agri-food supply chains: the case of the ASDA PorkLink supply chain in
Scotland Philip Leat and Cesar Revoredo-Giha
Food Marketing Team – Land Economy and Environment Research Group, Scottish Agricultural College (SAC), Aberdeen, UK
Abstract Purpose – The paper examines one of Scotland’s major pork supply chains and seeks to identify the key risks and challenges involved in developing a resilient agri-food supply system, particularly with regard to primary product supply, and to show how risk management and collaboration amongst stakeholders can increase chain resilience. Design/methodology/approach – The case study involved in-depth interviews with seven people involved in the chain and its management. Findings – Reduced supply chain vulnerability to risks arose through horizontal collaboration amongst producers, and vertical collaboration with the processor and retailer. Producers improved market and price security, and pig performance. For the processor and retailer the collaboration generated greater security of supply of an assured quality, improved communication with suppliers, and reduced demand risk as they could assure consumers on quality, animal welfare and product provenance. Research limitations/implications – The study’s findings are based on the analysis of a particular supply chain, but the cooperative concerned currently produces over half of Scotland’s weekly pig production. Practical implications – The findings are highly transferable to other agri-food supply chains. Producers’ successful efforts to deal with different risks and the role of collaboration in enhancing chain resilience are illustrated. Originality/value – The case is interesting because pigmeat supply profitability has been under constant pressure. It discusses the risks faced by all chain participants and the collective development of a chain which is relatively resilient to variations in price, production and supply.
Keywords Pig producers, Animal welfare, Supply chain vulnerability, Risk, Supply resilience, Scottish agriculture, UK agriculture, Meat, Food industry
Paper type Research paper
I. Introduction
In recent years there has been growing concern that the
world’s food systems for producing and distributing food
should, inter alia, be more resilient to a variety of shocks, be
they economic, of natural making, accidental, malicious or
borne out of ignorance (e.g. Evans, 2009). In the UK,
Ambler-Edwards et al. (2009, p. 5) have indicated that the
future food system will have to combine, despite possible
conflicts, four characteristics, namely: resilience,
sustainability, competitiveness and the ability to meet and
manage consumer expectations. Over the past ten years or more there has been a growing
interest in systemic risk; risk to the systems on which society
depends (OECD, 2003; Renn and Klinke, 2004). The main
categories or clusters of such risk are regarded as natural
disasters (including those arising from climate change),
technological accidents, infectious diseases, terrorism-related
risks and food safety (OECD, 2003). Government
Departments in the UK, along with businesses, have
become more interested in the sustainability of food
businesses and their resilience to shocks in the event of
crises occurring (see for example, Peck, 2006; AEA Group
and SAC, 2009). Thus, at a governmental level the interest in
resilience has been allied to a widespread concern with the
sustainability of food supply systems (e.g. Scottish
Government, 2009; Welsh Assembly Government, 2010;
Defra, 2012) and concern about possible crises such as food
scares, disruption due to terrorism or natural disasters such as
flooding, civil unrest or disease outbreaks. While the aforementioned issues have also been of
importance for the business community, their immediate
preoccupation has been with risk management for legislative
compliance reasons (e.g. in relation to food safety; health and
safety of workers, waste disposal). However, there is a
widening interest in supply chain resilience as an essential
component of business continuity. In fact, resilience can be
considered as a key component of the sustainability of a
business. In this respect, the issue of providing business
continuity and resilience in the food supply system in the
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-8546.htm
Supply Chain Management: An International Journal
18/2 (2013) 219–231
q Emerald Group Publishing Limited [ISSN 1359-8546]
[DOI 10.1108/13598541311318845]
This study derives from work commissioned by the Scottish Government as part of the 2011-16 Research Programme on Food Security and Resilient and Sustainable Supply Chains (Theme 5, Workpackage 5.1). Any opinions expressed within the paper are entirely those of the authors.
Received: 2 March 2012 Revised: 26 June 2012 Accepted 6 August 2012
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event of market disruption is one which retailers have
traditionally looked to their suppliers to deal with, but
increasingly they are taking a more pro-active stance in developing such supply resilience (Peck, 2006, p. x).
Although there is plenty of academic interest in sustainable
and resilient supply chains (see for instance Peck, 2006; Briano et al., 2009; Ponomarov and Holcomb, 2009; Shaer and Goedhart, 2009), the extent of research into what this means for the upstream part of the supply chain, particularly
at the farm level in agri-food supply chains, is rather more
limited, and related to disease outbreaks such as the Foot and Mouth or the BSE crises (see Peck, 2006 for related
references). In this context, the purpose of this paper is
twofold. First, to identify and categorise the key risks and challenges involved in developing and maintaining a resilient
agri-food supply system, with particular attention paid to the
supply of primary product and the related risk issues that can be directly addressed; second, to show how risk management
and collaboration among stakeholders can increase supply
chain resilience. The paper uses the example of one of Scotland’s major pork
supply chains, that of Scottish Pig Producers Ltd. (i.e. Scotland’s major pig production co-operative), Vion
Food Scotland Ltd (Halls) (i.e. a major pigmeat processor)
and the UK multiple retailer ASDA. The PorkLink chain was selected for study as it has become recognised as a particularly
noteworthy example of agri-food supply chain collaboration,
winning a Scotland Food and Drink award in the “Success through working in partnership” category in 2010, and
featuring in research by the Scottish Agricultural Organisation
Society on the benefits of collaboration (SAOS, 2009). The case is interesting because the profitability of the pigmeat
supply chain has been under constant pressure due to short
term variation in prices, and longer term price depression (partly due to competition from cheaper imported products),
as well as escalating feed prices. In addition, the profitability
has been affected by issues related to production shocks in the form of animal diseases and to changes in animal welfare
policy. Moreover, the pig sector is not part of the EU
Common Agricultural Policy regime of direct payments and therefore reflects a sector that it is more exposed to market
forces and risks. The case discusses several topics such as the risks faced by
pig producers, the processor and retailer in supplying pork,
and the approaches that they have collectively developed to produce a chain which is both relatively resilient to short term
price variations, and production and supply problems. The structure of the paper is as follows: it starts by
presenting a theoretical framework based on the literature,
where individual and supply chain risks are highlighted. This is followed by a description of the problems and risks that
have faced the Scottish pig industry in recent years and the
development of the case study. The pig supply chain is presented and the measures taken to reduce the vulnerability
of the chain, made in the context of collaboration, are
reviewed. Finally, conclusions are presented.
II. Theoretical framework
As a starting point it is important to recognise that this paper
is concerned primarily with the risks faced by an individual supply chain and its constituent businesses in relation to the
supply of primary and processed product. Therefore, it only
concerns itself with food safety, infectious diseases and
adverse climate in as far as the players concerned can
influence them, but not with a full range of wider systemic
risks to the food chain, such as acts of terrorism, industrial
disruption or natural disasters. Risk is uncertainty that affects an individual’s welfare (or
that of a business), and is often associated with adversity and
loss (Bodie and Merton, 1998). Peck (2005) stresses the basic
nature of risk drawing from its definition in the English
dictionary (Collins English Dictionary, 2000) – a product,
process organisation, etc. is at risk if it is vulnerable, likely to
be lost or damaged. Uncertainty, a situation in which a person
or organisation does not know for sure what will happen, is
necessary for risk to occur, but uncertainty need not
necessarily lead to a risky situation. Risk is uncertainty that
“matters,” and may involve the probability of losing money,
possible harm to human health, repercussions that affect
resources, and other types of events that affect a person’s (or
businesses’) welfare (Harwood et al., 1999). Within the literature several authors have sought to define
risk (e.g. Baird and Thomas, 1990; Shapira, 1995; Yates and
Stone, 1992; Zsidisin, 2003), while Sitkin and Pablo (1992,
p. 10) have defined it as “the extent to which uncertainty
about whether potentially significant and /or disappointing
outcomes of decisions will be realized”. Ritchie and Marshall
(1993) have noted that numerous definitions of risk exist in
relation to specific contexts and types, while Shapira(1995),
notes that no single definition of risk may be appropriate in all
circumstances and that risk has multiple facets. In this paper
we shall be concerned with the risk facing individual
businesses and thereafter whole supply chains. First, however, it is necessary to consider the concept of
vulnerability. Asbjørnslett and Rausand (1999, p. 220), define
this concept as:
[. . .] the properties of a production system [..] that may weaken or limit its ability to endure threats and survive accidental events that originate both within and outside the system boundaries.
As noted above, in relation to Peck’s writings, vulnerability
embodies the notion of being at risk. Supply chain
vulnerability is the susceptibility of the supply chain to the
likelihood and consequences of disruptions (Blos et al., 2009; Svensson, 2000, 2002; Christopher and Peck, 2004). Thus
the study of supply chain vulnerability involves identification
of supply chain risks, which will embrace those facing both
the participating businesses and those particular to the entire
supply system. A further key concept is the related one of resilience. Briano
et al. (2009) note that in material science, resilience represents the ability of a material to reacquire its original shape, while in
the business sector, resilience refers to the ability of a
company to resist a serious damaging event. In a similar
manner, Christopher and Peck, 2004, define resilience as the
ability of a system to return to its original state or move to a
new, more desirable state after being disturbed, while Fiksel
(2003, p. 5333) proposed that resilient systems satisfy four
major characteristics, namely: diversity; efficiency;
adaptability; and cohesion. Implicit in these definitions are the notions of flexibility and
adaptability. At the supply chain level, resilience aims at
developing the adaptive capability of the chain to prepare for
unexpected events and to respond to disruptions and recover
from them (Ponomarov and Holcomb, 2009). Thus a
The case of the ASDA PorkLink supply chain in Scotland
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company or supply chain that has developed its resilience is
better able to support the unpredictability of domestic or international trade, thereby achieving a competitive advantage
through being able to recover more quickly than competitors
when an adverse event arises. Implicit in the development of chain resilience is the process of risk management; a
continuous cycle of identification of hazards, assessment of risks, analysis and selection of controls, implementation and
review (after Manuele, 2005). Pettit (2008) has brought these ideas together to form a
conceptual framework which involves the vulnerability of a business or chain to various forms of external and internal
hazards or risks (Pettit, p. 26) and its capability to cope with these. Capability is regarded as arising from a series of factors
such as flexibility, spare capacity, efficiency, visibility, adaptability, anticipation, recovery, asset dispersion,
collaboration, organisation, market position, security and financial strength. Pettit identifies a zone of balanced
resilience in which an enterprise or chain’s abilities to cope with vulnerability to risk are balanced by its capabilities to
cope with them. We now consider the types of risk that
individual businesses and supply chains face and which have to be managed if a chain is to be resilient.
II.1 Risks faced by individual enterprises
Before considering the risks and resilience of an agri-food
supply chain, we start with the risks faced by individual agricultural enterprises; the proximate starting point of many
agri-food supply chain systems. Risk, particularly in relation to supply networks, can be classified in a number of ways (see
for example Harland et al., 2003), but here we draw on a classification presented by the Harwood et al. (1999) and shared by Hardaker et al. (2004), which is particularly appropriate to agri-food production and marketing. . Production risk occurs because agriculture is affected by
many uncontrollable events such as extreme weather and pest and disease outbreaks. Technology may play a part in
reducing production risk. For example, high quality housing may reduce the risks of ill-health in a pig
production unit. High bio-security procedures may also reduce the dangers of introducing disease into a healthy pig
herd, while high welfare and production protocols (regular visits from a veterinary advisor, participation in disease
control, sourcing of feeds and supplements from approved suppliers) may also help to reduce production risks.
. Price or market risk is associated with changes in the prices of output or inputs that may occur after production
has been initiated. Agricultural production is often a lengthy process. Livestock production, for example,
typically requires ongoing investments in feed,
equipment and energy that may not produce returns for a prolonged period, thereby making price or market risk
particularly relevant. . Institutional risk arises from changes in policies and
regulations. This type of risk may take the form of unanticipated production constraints, such as higher
animal welfare standards, or subsidy changes for inputs or output. Other institutional risks may arise from changes
in environment related policies, such as the disposal of animal manure, or adjustments in taxation or credit
policy. Hardaker et al. (2004) suggest that institutional risk may also embrace “relationship risk” which is the risk
inherent in the dealings with business partners and might
include the breakdown of agreements between supply
chain participants. . Human or personal risks are common to all businesses.
Business disruption may result from events such as the
death, injury, or poor health of key workers. Asset risk is
also common to all businesses and involves theft, fire, or
other loss or damage to equipment, buildings and
livestock. . Financial risk results from the way a firm’s capital is
obtained and financed. A business may be subject to
fluctuations in interest rates on borrowed capital, or face
cash flow difficulties if there are insufficient funds to pay
creditors.
II.2 Supply chain risks
Supply chain risks and their management is an area of
increasing interest and study, see for example Blos et al.
(2009); Manuj and Mentzer (2008); Shaer and Goedhart
(2009); Tummala and Schoenherr (2011). The latter authors
have conceptualised supply chain risk with an appealing
simplicity, namely “an event that adversely affects supply
chain operations and hence its desired performance
measures”. Like the risks facing individual businesses,
supply chain risks can also be categorised in various ways
and from different perspectives. A selection of risk types,
identified by a variety of authors and which are relevant to the
supply network context, is provided by Harland et al. (2003).
Tang (2006) (see also Mandal, 2011) suggests that there are
two types of risks in a supply chain. First, those sometimes
termed operation risks, arising from uncertainties in demand,
supply and cost factors, which by their nature are ever
present. Second, disruption risks, which arise from natural
disasters, such as weather disruptions, or man made ones
such as economic crises. A further categorisation is provided by Mason-Jones and
Towill (1998). Within an enterprise, there are “process” and
“control” risks. The former are those risks associated with
interruptions in the processes of creating value and
managerial activity within the business, while control risks
are those connected with a breakdown in or misapplication of
the systems and standards that are used to control the
processes. External to the enterprise, but inside the supply
chain, there are network risks which may be divided into
“demand” and “supply” risks. Demand risks are those of a
breakdown in the flow of product, information or revenues
between an enterprise and its customers. Similarly, supply risk
is that of a breakdown in material and service supplies,
information and monetary flows between an enterprise and its
suppliers. The fifth category of supply chain risk concerns the
interruptions which are outside the organisational network
which makes up the supply chain. “Environment” risk refers
to the events, which can directly impact on the company or its
upstream and downstream supply system. They may be
social, policy/political, economic, technological or natural
environment developments/events, and collectively comprise
the environment within which the supply chain has to operate.
Miller (1992) provides a description of the contents of this
environment through what he terms general environmental
uncertainties. While the supply chain participants will
normally have little or no control over this environment,
they have to cope with its implications for their activities.
The case of the ASDA PorkLink supply chain in Scotland
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Figure 1 provides a diagrammatic representation of the risks
facing individual businesses within a supply chain, which
may range from primary producers through to retailers, as
well as the risks faced by the chain as a whole. These are
clearly related. For example, the production risks of farmer
producers will be part of the supply risk faced by others
further down the chain. Similarly, the market risk faced by
the retailer will ultimately represent the demand risk for the
chain as a whole. Furthermore, the health and welfare measures taken by
farmers to limit production risk (associated in this case with
poor health, low productivity or quality of pigs), and the
procedures to verify those measures, are all part of the chain’s
efforts to minimise process and control risk. Wider
“environment” risks will ultimately manifest themselves as
the risks facing individual businesses and may affect all
businesses within a supply chain simultaneously, as would be
the case with increased energy prices. These risks may
ultimately represent systemic risk for the whole food system. We now turn to the risks faced by the Scottish pig industry
before examining how the largest grouping of pig producers in
Scotland, along with its supply chain partners, have sought to
cope with the major risks that they face, thus increasing the resilience of their supply system.
III. Risks affecting the Scottish pig industry
The purpose of this section is twofold: first, to present an overview of the difficulties which have affected the Scottish pig sector in recent years; and second, to highlight the major risks that impinge on its normal operation.
Over the past 10-15 years the pig sector in Scotland, as well as the UK, has suffered from a series of crises. The most recent difficulties, characterised by massively depressed profitability and falling pig numbers, arose in 2007 and 2008. However, the industry’s situation had started to deteriorate after 1997 when the Scottish pig industry, in line with the rest of Europe, had expanded rapidly in response to market demand. High pig prices throughout the EU were encouraged by reduced supplies from The Netherlands due to disease problems, and by strong international demand aided by consumer reaction to the beef BSE crisis. A crisis appeared very quickly in 1998 when, as shown in Figure 2, market prices for finished pigs fell sharply to levels well below the 90 p/kg cost of production. Two years earlier prices had averaged over £1.30/kg. This price collapse was the result of a
Figure 1 The risks facing individual enterprises and the whole supply chain
The case of the ASDA PorkLink supply chain in Scotland
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combination of factors, including: the emergence of a serious
imbalance in the EU market which moved to 108 per cent self
sufficiency; a sharp reduction in export demand from Russia
and S E Asia; the strength of Sterling, which heightened
import pressures on the UK market; and changes in pig
pricing arrangements by major processors. According to Philip Sleigh, Chairman of the Pig Committee
of the National Farmers Union Scotland (RAEC, 2009), until
1997 the “pig cycle” worked, with prices rising and falling
over a 5 year period, so that if producers made losses in one
year, they could probably recover them over the next four.
After 1997 not only did the pig price collapse but from 1998
the size of the pig breeding and fattening herds also decreased
markedly. Between 1998 and 1999 the pig breeding herd fell
from almost 74,000 to 59,000, a decline of over 20 per cent
(Scottish Government, 2010). These problems were
exacerbated in 1999 when the UK, seeking to raise pig
welfare, introduced bans on tethers and close-confinement
stalls for breeding sows. These were introduced well ahead of
EU-wide bans, which on tethers came in 2006 and on sow
stalls are expected to be in 2013. The pig price struggled to
recover for various reasons, including two foot and mouth
disease outbreaks (in 2001 and 2007) and a relatively strong
exchange rate with Europe which encouraged imports, see
Figure 3. The adoption of high welfare measures did not result in
superior pork prices relative to those for pork produced under
lower welfare standards. Instead, according to Gordon
McKen, Chief Executive of Scottish Pig Producers Ltd
(RAEC, 2009), “after the welfare rules were tightened in the
UK in 1999, retailers changed their purchasing criteria
virtually overnight by adopting EU welfare standards. . . .Pork
that is produced to EU welfare standards is cheaper, and that
is what is used in promotions that move huge volumes.”
(RAEC, 2009, paragraph 73). While retailers might contend
the degree of this welfare disparity, the pressure from imports
on domestic prices was very real. The most recent crisis, which reached its worst point during
2007-2008, was compounded by a steep rise in feed prices
linked to the global spike in commodity prices, see Figure 2.
This event particularly hit farmers who depended on
purchased feedstuff including barley. Data from the Pig
Sector Task Force (2008) show that over the period October
2006 to March 2008, pig producers’ net margins fell by
between £20 and £29/pig depending on the feeding system
used (purchased rations or home mixed). A further potentially damaging complication was that in
2007 the Grampian Country Food Group (GCFG), the
owners and operators of Scotland’s major pig slaughtering
and processing plant at Broxburn in Central Scotland, ran
into financial difficulties, reflected in delayed payments for
pigs sent to slaughter[1]. This threw into question the future
of the plant, which was, and still is, regarded as integral to the
future of the Scottish pig sector. Closure of this plant, without
the availability of alternative slaughter and processing facilities
in Scotland, would involve the transport of large number of
pigs to England for slaughter and processing; with all the
additional cost of £4 to £5 per pig. In the middle of 2008
GCFG was purchased by the Vion Food Group. From this brief description it is apparent that by 2009
Scottish pig producers were facing a complex of significant
and related business risks. These may be summarised as
follows: 1 Production risk:
. danger of disease outbreaks and a tarnished image
arising from disease concern. 2 Market risk:
. the loss of a major market outlet;
. adverse product price arising from an intensely
competitive market; . strong market competition from imports, exacerbated
by exchange rate movements; . escalating feed costs (the major component of
production costs); . danger of slow and even possible non-payment.
3 Institutional risk: . animal welfare legislation impacting adversely on
competitiveness; . potential restrictions on waste disposal.
From the perspective of the major processor, Vion UK,
having invested in the Broxburn plant they were concerned to
secure a strong and reliable supply of pigs for processing,
thereby lessening their “supply risk”. Simultaneously they
needed to reduce their “demand risk” by being able to
Figure 2 Finished pig prices and compound feedstuff prices – Scotland, 1995-2010
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guarantee a high quality reliable supply of pork and pork
products to their major customers. In the next section we present the case study in which we
identify and analyse how the supply chain participants, and particularly the pig producers, have sought to reduce their
own individual and collective supply chain risks, thereby making the chain more resilient.
IV. Case study: increasing supply chain resilience through collaboration
This section describes the methods used, provides a brief overview of the major characteristics of the supply chain
under study, presents a description of the major risks affecting the chain and the capabilities developed through collaboration
to cope with them, and ends with a summary that highlights the main points of the analysis.
IV.1 Methods
A case study approach was selected to investigate the risks and challenges faced in developing a resilient agri-food supply
system as it offered the opportunity to investigate “how” and “why” questions. For example, how does risk manifest itself,
and why is a particular hazard or type of risk important and why is it managed in a particular way? Moreover, a case study
approach allows these questions to be considered within a particular context or risk environment.
The primary research involved in-depth, recorded interviews with seven senior people involved in the chain
and its management. Good case study practice was followed throughout (Hirschman, 1986; Robson, 1993; Reige, 2003),
with background research undertaken on the supply system and its participants, a common set of questions for use with
those interviewed, the opportunity for supplementary questioning on each topic area covered, audio and written
recording of all interviews and verification of the findings by the organisations and individuals concerned.
Each interview lasted between 60 and 75 minutes and was conducted with the use of a semi-structured interview
guide[2] which covered, among other things, the goals of the business, the practicalities of the supply arrangements, the
risks faced in relation to production and supply, the benefits
arising from the supply arrangements including the
management of risks, and the conditions which gave rise to
those benefits. Supplementary questions, of a how and why
nature, were also used to probe the replies of those
interviewed. The interviews were undertaken between June and August
2010 and included interviews with: the Chief Executive of
Scottish Pig Producers Ltd. (a producers’ cooperative); two
pig producers that are members of the cooperative; a further
producer-member who holds a prominent position on the National Farmers Union Scotland – Pigs Committee; an
executive officer of Vion Halls (processor) who is directly
involved with the operation of PorkLink, and two key officers
from ASDA (the Head of Ethical and Sustainable Sourcing,
and the Agricultural Development Manager). The analysis of the interviews involved collated
identification of key risk areas for each party, common
issues/concerns in relation to each of these risks, responses on
how the risks are managed, benefits arising from the risk
management activities and factors affecting the realisation of
benefits.
IV.2 Description of the supply chain
The Scottish Pig Producers-Asda-PorkLink supply chain is
represented in Figure 4. Scottish Pig Producers Ltd (SPP) is a pig marketing
cooperative based in North East Scotland. The cooperative
was originally established in 1979 as Grampian Pig
Producers, being formed as a response to dwindling
marketing and processing opportunities in North East Scotland. The area has traditionally been a focus point of
the Scottish pig industry with pigs being fed barley, which is
grown in significant quantities on local farms. SPP currently
has a membership of 120 breeders, finishers and feed
companies, of which 85 are trading members who supply
finished pigs for slaughter (the non-trading members are
primarily breeders and feed companies). Based at Huntly, the cooperative organises the marketing, collection, transport and
payment of its members’ pigs as well as providing insurance
against payment default. It supplies approximately 380,000
finished pigs per year and currently produces over half of
Scotland’s weekly pig production.
Figure 3 UK pigmeat imports from the EU and average exchange rate of GBP against the Euro, 1995 – 2010
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The pig production sector is unsupported by the Common
Agricultural Policy. Consequently, SPP has sought to develop
a range of marketing outlets and to be proactive and
collaborative in its marketing activities so as to maximise the
commercial market opportunities for its members. Among the
slaughterer-processors that SPP supplies, the largest is Vion-
Halls (Vion Food Scotland Ltd (Halls) – part of the Vion
Food Group), to which it consigns 4,000 pigs per week. The
processor is located at Broxburn in Central Scotland and
handles up to 13,500 pigs weekly supplying most of the
multiple retailers, food service, independent retail and export
sectors. According to RAEC (2009, paragraph 51) this plant
is the only industrial scale pig slaughterhouse and pig meat
processing plant in Scotland. Of the 4,000 pigs per week
consigned to Vion Halls by SPP, 3,000 are for ASDA under a
distinctive arrangement known as ASDA PorkLink. The Asda PorkLink scheme, which commenced in June
2009, involves a unique agreement between three parties: the
pig producers and their cooperative SPP; the processor Vion-
Halls and the retailer ASDA. It is the single largest pigmeat
supply chain involving Scottish producers, and aims to
strengthen links with farmers by encouraging supply
consistency and improved quality, as well as greater
financial stability in the pig sector. As such, it involves
considerable collaboration between chain participants,
sharing information on enterprise performance and
development. Under the PorkLink scheme, SPP has a 12
month rolling contract to supply 3,000 pigs per week to
ASDA which provides pig producers with access to a major
market, prices which are linked to the deadweight average pig
price (DAPP), bonus payments for carcases of preferred
quality (Q-grade pigs) and prompt payment. The scheme also draws on the knowledge exchange deriving
from Scotland’s two Monitor Farms for pigs, and involves
regular producer meetings. In addition, the Scottish Society
for the Protection of Animals (Scottish SPCA) inspects
supplying farms, haulage and Vion-Halls’ premises to verify
high animal welfare standards throughout the supply chain.
The meat therefore has a high animal welfare attribute which
is verified by the Scottish SPCA and this is indicated on retail
meat packs. The SPP farmers are also all members of Quality
Meat Scotland’s Farm Assurance – Pigs scheme which sets
and verifies standards for: the origin of livestock;
management, stockmanship and welfare; veterinary care;
accommodation and handling; feeding and waste; bio-security
and cleanliness; and loading and transport[3]. The chain has
Figure 4 The Scottish Pig Producers – Vion-Halls – ASDA PorkLink chain
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a strong emphasis on animal health with pig carcases being
inspected at point of slaughter for any evidence of disease
problems. This slaughter disease surveillance scheme –
operated by Wholesome Pigs (Scotland) Ltd – feeds back
information to farmers and their vets if any problems are
observed with the pigs’ carcasses so that any necessary
remedial action can be taken[4]. Finally, Quality Meat
Scotland has worked with Vion-Halls so as to improve use of
the pig carcase, and worked with the retailer on pork
promotion, i.e. the Specially Selected Pork campaign.
IV.3 Vulnerability to risk and developing the capability
to cope with risk
In this section we consider the vulnerability of SPP and the
supply chain to the various forms of risk that they face, and
the capability of SPP, its members and the chain to cope with
these risks. We start by considering forms of market risk for
SPP and its producers. It should be noted that we do not
enter into any detail on how Vion UK or ASDA manage risks
within their businesses, but acknowledge that they have
detailed and rigorous systems.
Production risk The major source of production risk takes the form of low
productivity which may primarily arise from poor husbandry,
poor animal welfare or disease, as well as inefficient
production practices.
Reducing production inefficiency through benchmarking and monitor farms. All players within the chain use a range of indicators to monitor business efficiency and productivity.
The pig producers have the opportunity to access the Pig
Business Network (also known as the Pig Hub) which enables
them to access a wide range of comparative performance
(benchmarking) information on enterprise productivity and
efficiency (see www.pigbusinessnetwork.scottishagriculture.
com/index.php). The Network also embraces two monitor
farms, an indoor and outdoor unit, which provide the focus
for discussion by producers on a wide range of performance
related topics.
Consumers’ concern on production systems and animal welfare addressed by Farm Assurance and Scottish SPCA approval. In order to address consumer concerns about pigmeat
production and animal welfare, Quality Meat Scotland’s
Farm Assurance – Pigs scheme regulates, as noted, a wide
range of issues at the farm level, as well as pig loading and
transport. Set standards are also required, and inspected, in
the slaughtering and processing of the pigs. A further aim of
the assurance regime is to achieve a consistency of tenderness
and eating quality that is desired by consumers. All SPP
members are members of the QMS Assurance Scheme[5]. High animal welfare in both pig production and transport is
further assisted by inspections and guidance from the Scottish
SPCA with farm and transport companies being inspected. In
the first year of the arrangement, some 600,000 pigs were
involved in the inspections. This arrangement, which includes
a label of approval by the Scottish SPCA on retail packs of
meat, has enabled ASDA to market its Specially Selected Pork
supplied through PorkLink as “Approved by Scottish SPCA –
Scotland’s Animal Welfare Charity”, and thereby as a clear
alternative to the RSPCA’s Freedom Food brand, which
occupies a “premium” segment of the market.
The above measures – which seek to ensure the efficient production of high welfare, healthy animals of known origin – all serve to reduce production risk for the farmers, but are also reducing process risk for the chain as a whole. The use of external verifiers is also contributing to the reduction of control risk for the relevant upstream parts of the chain.
Animal disease risk reduction through carcass surveillance. Meat quality and disease reduction are both assisted by a slaughter disease surveillance scheme. Wholesome Pigs (Scotland) Ltd is a producer co-operative formed to manage the health scheme where pig carcases are monitored post-slaughter to assess the presence of any clinical disease. Regular reports from each pig herd are then sent to SPP, each producer and their vet. The combination of pig health monitoring and traceability provides benefits in terms of reduced use of antibiotics and medicines, eradication of diseases, reduced production costs and the ability to promote a healthy more “wholesome” product in the market. Producers, processors, retailers and consumers all enjoy the benefits that the programme provides.
Market risk The pig farmers generally seek to be good, efficient producers making a reasonable profit which is capable of maintaining the business and meeting the needs of the farm household. An integral part of their economic objectives is to secure a viable market for their production. SPP, as a producer cooperative, has a set of goals which are very much in line with those of its producer members. It thus seeks to arrange the efficient delivery of its members’ pigs to profitable and secure markets, which provide prompt regular payments. It also endeavours to aid its members in their production activities wherever possible, through providing market feedback and assisting knowledge transfer on pig production innovation.
Ensuring market access through a contractual agreement. SPP markets approximately 380,000 finished pigs per year with several processors and major retailers being supplied. It needs to cope with the risk of losing access to high volume, profitable markets. The ASDA PorkLink arrangement is a secure high volume market for SPP accounting for 3,000 pigs per week which are supplied on a contracted basis; this is a significant part of SPP’s production. The contracted arrangement with ASDA operates on a rolling annual basis with one year’s notice required for any changes. It thus gives a high degree of market continuity and security, and reduces demand or market access risk for the pig producers.
The delivery of large numbers of pigs to Broxburn, which account for a significant part of the plant’s weekly kill, is helping to maintain the plant’s viability and thereby maintain access to an important market for SPP and its members. Broxburn is Scotland’s largest pig processing unit and its loss would place a major burden on Scottish pig producers as transportation to Northern England for processing would cost an additional £4 to £5 per pig.
Limiting pig price uncertainty through pricing transparency and DAPP linkage. The contracted arrangement also provides some protection against the worst effects of price deterioration. The market has a high degree of transparency with prices being set in relation to the deadweight average pig price (DAPP). The ideal carcase is 70-85 kg of Q grade, and 3 pence per kilogram bonus is paid for such pigs. The price of a producer’s pigs is known very quickly with the DAPP being
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published weekly on a Wednesday. Thus, if a pig is delivered
on a Monday the price it has achieved will be known by Wednesday, while for Thursday deliveries, the price will be
known by the following Monday. Payment is normally made within seven days.
Limiting feed price risk through a feed cost supplement. A major issue for the pig industry in recent times has been the rapid escalation in feed costs. ASDA has been prepared to assist
with this problem by paying an 8p per kg feed supplement. This was paid over four months from February to May 2011
and was worth over £334,000. These payments enabled SPP to provide rapid financial relief to its producer members. For
ASDA this method of support has avoided the problem of indirectly raising the DAPP (and thus their own procurement
costs) by paying higher pig prices to compensate for feed price escalation.
Non-payment insurance. SPP provides insurance for its members against non-payment, as well as ensuring that members get paid promptly – normally within seven days.
The non-payment arrangements have been in operation since 2007.
Overall, the contractual relationship between ASDA and SPP reduces market risk for the pig producers and reduces
supply risk for the chain as a whole. The retailer has continued access to guaranteed supplies of high quality meat
of set specifications and in these circumstances the transaction costs of pork supply for ASDA are somewhat reduced. The
supply guarantees provided by the contract with SPP are backed up by the scale of Vion, which might be able to
maintain supplies, at least in the short term, if SPP had supply problems due to events such as extreme bad weather. The
chain is thus regarded as relatively resilient, and the risks of pork supply interruption are somewhat reduced for ASDA.
For SPP and its farmers, the contract arrangement also reduces the transaction costs of their marketing activities,
while reducing risk associated with market access and price variation.
Institutional risk In the context of institutional risk (e.g. sudden changes in policy that have affected the sector in the past), the scale and
successful nature of SPP’s operations have made it an important player within the Scottish pig industry and one
which is frequently consulted, either directly or indirectly, on pig sector issues. This might occur through its involvement
with Quality Meat Scotland, or through its members being active within NFU Scotland. Furthermore, its views (together
with the views of other supply chain stakeholders) are routinely sought by Scottish Government in relation to the
state and development of the industry and any possible policy changes (see for instance RAEC (2009)). Thus, in a number
of ways SPP and its members are well placed to contribute to informed debates on industry issues and policy decisions, in
as far as they occur in Scotland rather than elsewhere in UK Government or the European Commission.
IV.4 Synthesising a balanced vulnerability to risks with
risk management capabilities
The risks faced by the chain participants, and particularly
those faced by the pig producers, are identified in Figure 5, along with the approaches used for reducing the vulnerability
to risks.
In the figure, the risks and risk reduction measures are
categorised according to the type of risk (production, market,
institutional), and located within the figure according to the
vulnerability (likelihood and consequences of disruption) of
the producers and supply chain to the risk concerned and the
extent of the capability that has been developed to cope with
the risk. Many of the risk management measures undertaken
by SPP and its members also contribute markedly to the
resilience of the supply chain as a whole, assisting the
management of supply, demand, process and control risk. The location of the risks and associated measures within
Figure 5 inevitably involves a degree of subjectivity, and the
implicit assumption is that the risks identified are relatively
important and that a significant capability has been developed
to cope with these. The figure also acknowledges that
excessive risk management capability relative to vulnerability
may exist, as might excessive vulnerability to risk relative to
the capability to cope with risk. The proposition is that SPP,
its members, along with the other chain participants, have
acted so as to secure a balance in their supply chain resilience.
V. Conclusions
The case has illustrated that that many forms of risk exist
within an agri-food supply system and that these may
ultimately be classed as relating to demand and supply issues,
and process and control matters. With respect to the
management of these risks, a number of points emerge
about the processes involved in developing resilience within
this particular chain. These points would appear to have
wider practical implications for the development of risk
management and resilience within agri-food supply systems.
Supply chain design should incorporate resilience
First, an element of resilience has been built into the supply
chain. ASDA can be regarded as engaging in supplier
development. They have selected and are supporting the
development of an already relatively successful and large pig
supply group, which has multiple production sites, a focus on
efficiency and quality and is well managed. This has been
effected through engaging in a rolling supply contract with
price transparency and an element of price guarantee,
information provision and assistance with feed costs during
feed cost escalation. Two obvious effects are apparent; the
arrangement has aided the economic sustainability of the pig
producers and engendered a high level of commitment
towards ASDA among the producers. In addition, ASDA has
also selected a large high quality processor with the capability
(capacity) to meet their supply commitments even in periods
of some difficulty (e.g. poor weather).
Develop a risk management focus
Second, at the producer level and beyond there has been a
readiness to anticipate and recognise the risks to be faced and
to manage them accordingly. This risk management focus
arises from the difficult experiences of producers, their
cooperative and pig processors in recent years (disease
problems, market collapses, processing plant closures, etc.).
The very proactive nature of SPP’s management has also
played an important role in developing a forward looking
approach to management (e.g. in planning waste management
and examining the issue of energy efficiency in pig housing).
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Collaboration greatly facilitates risk management
Approaches to coping with risk involve collaboration among
supply chain participants. First, this case illustrates the
importance of horizontal collaboration. The horizontal
collaboration between producers has enabled them to share
views on how to innovate and take production forward,
exchange production performance information, and provide
the scale and reliability of supply that is important to large
customers. Horizontal collaboration has also been developed
between the producers and their representative organisations
(SPP and QMS). Second, vertical collaboration has also been
vitally important. As well as helping producers with reducing
market risk, ASDA regularly attends producer meetings and
shares information with SPP and its members on market
development and other matters. Vion has also collaborated
with ASDA and SPP in new product development so as to get
a more balanced use of the pig carcase (i.e. through making
use of the less popular parts of the carcase). A key issue in
developing a collaborative approach to managing supply chain
risks is the extent to which a capability to cope with risk is
developed and how the costs and benefits of that risk
management are shared. Within the PorkLink chain it appears
that an acceptable distribution has been achieved.
Third party organisations can enable risk management
Third party organisations have also played a significant part in
assisting in the development of the chain in terms of its
establishment and subsequent value creation, e.g. through
verification of welfare standards and husbandry practices as
well as product development and meat promotion. However,
they have also played a part in risk reduction through assisting
in disease monitoring and welfare issues.
A favourable business environment
There are many factors within the wider business
environment that are totally beyond the control of the
supply chain participants, e.g. foreign exchange rates, many
trends in consumer habits and preferences, international cereal and energy prices, etc. However, the cooperative, its
members and its industry body QMS, have made every effort
to have a positive influence on this environment, through
meat promotion, research and representation.
Figure 5 Developing balanced supply chain resilience in the ASDA PorkLink chain
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Overall, it is apparent that supply chain resilience in agri-
food supply systems is very dependent on the resilience of
primary producers’ supply. Moreover, that from the outset of chain design, a proactive and collaborative approach towards
identifying and managing the risks involved within the entire
supply chain can significantly aid its resilience as well as
enabling other benefits such as improved financial performance.
Policy and research implications
It is widely recognised that increased food market volatility
requires greater investment in market-based approaches to risk management (FAO and OECD, 2011). The development
of collaborative supply systems should be regarded as one
such approach. Within Scotland’s National Food and Drink Policy
(Scottish Government, 2009) the issues of food security and
the resilience of supply systems feature prominently, and it is noted that Scotland’s food and drink supply is reliant on
complex domestic and global food chains which are
potentially vulnerable to disruption. The issue of supply chain collaboration also features in the context of improving
competitiveness and the realisation of economic and
environmental benefits (Scottish Government, 2009, p. 7). While the need for further food supply chain research and
stakeholder engagement is recognised within the policy
documentation, so as to improve knowledge of the food supply chain in Scotland, there is no immediate recognition of
the opportunities to enhance food supply risk management (at
both the micro and macro level) and resilience, alongside other economic and environmental benefits. The extent to
which these policy aims can be simultaneously served, and the
issues involved in equitably developing greater supply resilience, are worthy of further research.
One clear feature of the pork chain considered in this paper
is that the product and its supply have been differentiated so as to create value for all chain participants including
consumers. This has incentivised the risk management
process and offset some of the costs involved. With the issue of food supply resilience well up the political agenda in many
countries, it would seem appropriate to research the product,
business and supply chain conditions which are necessary for chain resilience to be developed and the processes by which
this can be achieved.
Notes
1 The Grampian Country Food Group which began in
North East Scotland in 1980 grew to become the largest
supplier of meat and poultry to British supermarkets with 20,000 staff and a £1.8 bn. turnover.
2 The semi-structured interview guide is not included in the paper; however, it is available from the authors on request.
3 Quality Meat Scotland (QMS) is the public body
responsible for helping the Scottish red meat sector improve its efficiency and profitability, and maximise its
contribution to Scotland’s economy. It markets the PGI
labeled Scotch Beef and Scotch Lamb brands in the UK and abroad and promotes Scottish pork products under
the Specially Selected Pork Banner. 4 Wholesome Pigs (Scotland) Ltd is a producer-owned
company whose aim is to promote higher health and
welfare standards on farms.
5 The Farm Assurance Scheme for Pigs is very widely
adopted across the Scottish pig industry.
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The case of the ASDA PorkLink supply chain in Scotland
Philip Leat and Cesar Revoredo-Giha
Supply Chain Management: An International Journal
Volume 18 · Number 2 · 2013 · 219–231
230
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About the authors
Philip Leat is Senior Food Marketing Economist in the Food Marketing Research Team of the Land Economy and Environment Research Group, Scottish Agricultural College (SAC), and is based in Aberdeen. He has over 30 years of experience in domestic and international research, focussing on the analysis and development of agri-food supply systems, along with related policy development. Philip Leat is the
corresponding author and can be contacted at: Philip.Leat@
sac.ac.uk. Cesar Revoredo-Giha is Senior Economist and Head of
the Food Marketing Research Team in the Land Economy
and Environment Research Group, Scottish Agricultural
College (SAC), based at the King’s Buildings Campus in
Edinburgh. His areas of specialisation are industrial
organisation of food markets, international trade and
econometrics. His main areas of interest are food policy
and the operation and performance of agri-food supply
chains (domestic and international).
The case of the ASDA PorkLink supply chain in Scotland
Philip Leat and Cesar Revoredo-Giha
Supply Chain Management: An International Journal
Volume 18 · Number 2 · 2013 · 219–231
231
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