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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

219

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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

Philip Leat and Cesar Revoredo-Giha

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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

Philip Leat and Cesar Revoredo-Giha

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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

The case of the ASDA PorkLink supply chain in Scotland

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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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Risk And Resilience Value Article

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