Supply Chain Network Management of a Cross-Border Relation. Project Risk and Procurement Management

Contents

I. Introduction

II. Procurement Management
a. Supplier Relationship Management
b. Authorities
c. Contract
d. Economical Risk
e. Scarcity of Raw Materials
f. Environmental Risk
g. Sustainability

III. Conclusion

IV. Reference

Abstract

This paper evaluates the relationship and the supply chain between a UK organization importing food and a Greek organization exporting food. The economic risks, issues of sustainability, environmental problems and scarcity of raw materials will be discussed in regards to the concept of a procurement management network. The main question is how such a network can be managed on a global scale, while looking at possible risks and case studies dealing with specific parts of the subject.

I. Introduction

This paper will discuss the importance of the procurement relationship of suppliers at an international supply chain, importing food from Greece to England.

The paper is structured in a linear way to give a clear representation of the important aspects of procurement and supplier relationship management (SRM). The important aspects will be assessed individually with a focus on how a sustainable relationship can be built considering that the economic situation could change rapidly in a cross-border relation. Firstly, it is essential to look at the SRM as a basis of the process of procurement. This is followed by an assessment of how the authorities should be involved and how a contractual concept can support a supply chain relation network. Furthermore, possible economic risks will be taken into consideration. These economic risks are in juxtaposition to a potential scarcity of raw materials and the difficulties that international trade has to deal with in order to show responsibility for an increasing environmental threat. Finally, it will be discussed, how sustainability can be ensured. All of those various aspects of procurement management will be supported by case studies to pave the way to a thorough conclusion in Chapter III.

II. Procurement Management

Procurement Management is described as a strategic approach with the goal to control costs and quality. It will be discussed how this goal can be reached by competent negotiation skills which ensure proper communication between the actors of a supply chain network. Supply Chain Management, and therefor the management of the relationship, underlie the practice of the Procurement Management (Thakur 2017, p. 52).

a. Supplier Relationship Management

SRM is described by Flynn and Hue and Zhao (2010, p. 58) as a strategic cooperation of the supply chain actors related to internal and external processes of cooperation. It is essential that in an international procurement environment the relationship between the individual suppliers is strengthened. This can be achieved by focusing on the following areas: information exchange between farmer, producer and retailer (Nijhoff-Savvaki & Trienekens & Omta 2011, p. 1116). The case No. 1 shows how a change of Supply Chain actors and systems can disrupt the information exchange between the actors and what the consequences are.

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In a cross-border relation it can be challenging to keep up a working communication between the actors of a supply chain. The aim of successful communication is to mitigate risk and losses during a disruption phase. The case study of Marks and Spencer gives a good example.

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Creating trust among the actors in a supply chain has a direct impact on the performance of the collaboration. Tesco launched an online supplier network to strengthen the relation to their supply chain actors as mentioned in case no. 3.

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In addition, a fairly elaborated bilateral treaty defining the relations and responsibilities of the actors involved will be a key factor supporting the relations between the actors. (Baily & Farmer & Crocker & Jessop & Jones 2015, p. 532). While formulating such a contract, it is recommended that the competent authorities of the government cooperate.

b. Authorities

The authorities have the responsibility to design the rules and regulations related to export and import in such a way that a functioning business relationship between the cross-border actors of a supply chain is facilitated. Bilateral contracts should be drawn up and the support of NGOs should provide training in the field of technology, marketing and branding (Karipidis & Chrysochou & Karypidou 2017, p. 9; Miltiadis & Bourlakis & Dawson & Nees 2008, p. 651; and Nijjoff-Savvaki et al. 2011, p. 1122).

c. Contract

The contract should therefore be drawn up considering all the interests of the supply chain actors involved. England has a case in which the contracts between farmers and producers did not integrate the retailer. This leads to a gap that reduces the performance of innovation in the supply chain, which should actually involve all actors into the contract to function properly. (Nijjoff-Savvaki et al. 2011, p. 1116). As per definition by Baily et al. (2015, p. 532) “The contract should therefore be drawn up considering all the interests of the suppliers involved” As mentioned in Chapter 1.2 this confirms the importance the authorities have in supporting such contractual processes on a governmental level, especially when dealing with a cross-border Supply Chain. Furthermore, it is important that all parties involved into the procurement have a knowledge about the legislations of the contract and what those are aiming for, as stated by Baily et al. (2015, p. 531). Looking at the approach of Nijhoff-Savvaki et al. (2011, p. 1122) it is not only important to bring the procurement to an appropriate level of knowledge, but to include all levels of a supply chain in order to achieve the best possible result. The contract must have the acceptance of all involved actors and it must be in adherence with international guidelines. This process can be supported by joining an NGO platform, which can make a sustainable contribution to compensate the know-how of farmers and producers.

The challenge is to point out the importance of involving all the supply chain actors in the processes constantly and therefor mitigating the chance of a statement as made by an interviewed supply chain actor: “such contracts are often not meaningful and can easily be broken" (Nijhoff-Savvaki et al. 2011, p. 1116).

On the other hand, a statement by Nijhoff-Savvaki at al. (2011, p. 1121) says: It has been noted that both in the UK and in Greece contractual agreements involving retailers have proved to be innovation-enhancing measures, specifically between producers and farmers, benefiting retailers to better meet the needs of target groups. This shows a positive impact on the relation and therefor would mitigate the economic risks resulting out of a supply chain disruption. It could solve the problem by building up a fundament of trust and contractual relation.

d. Economical Risk

An economic risk, especially in connection with the supply chain, can refer to the fact that a delayed, prevented or not as defined performance of one of the supply chain actors can result in substantial financial losses (Asbj0rnslett 2009, p. 21). Cross-border relations involve a higher risk as stated by Jaradt and Rehman: (2017, p.814) "Entering into any trade contract has its risks, but those risks are always greater when one party is located in another country." For Greece to withdraw from the EU is a big risk, the Supply Chain agreements would have to be re-evaluated, the contracts as well as the value of the currency would change (Jaradt & Rehman 2017, p.817). And if the government introduces capital controls that freeze or regulate funds, there is a risk that companies will no longer be able to dispose of their funds and therefore their monetary resources. (Jaradt & Rehman 2017, p.817)

The current situation in the UK regarding the Brexit is also a risk that needs to be considered: Uk has been importing food for 50 years, this works through the 750 trade agreements of the EU. The imported goods run through the port of Rotterdam, the safety regulations and inspections are carried out on site and under the control of the European Food Safety Authority and its complex and proven system. Nobody knows how the situation will be approached after the exit of the EU. Not even the authorities know how the risk is to be classified and what impact it will have on the costs and food safety (Lang & McKee 2018, p. e608).

Especially in the case of Greece where the contractual relation can be affected by external issues, such us revaluation of currency. These issues are not predictable, regardless of how firm a relationship between the actors is (Jaradt and Rehman 2017, p.816) the risks in trade contracts are very high. Since the loans given to the Greek state through external funds to plug the financial holes were not used as promised, the Greek state apparatus is not given much trust (Jaradt & Rehman 2017, p.817). Which is also reflected in the export figures shown by Karipidis et al. (2017, p. 2) "The Greek agricultural export balance remains in deficit with 1.343 billion euros in 2014 (EU Statistical Factsheet, 2016)." What can again turn out to be an opportunity and a positive risk, because of the motivation that can develop from such pressure, the decline in local trade forces the actors of the Greek Supply Chain to open up their market for increased export of their products. New paths are being explored by Greek businesses according to the statement of Gjekanovikj and Bizmpioulas and Rotsios (2015, p. 585), which are an opportunity to avert the crisis. This could have a positive impact on the farmers attitudes whose role is crucial in the Supply Chain (Karipidis et al. 2017, p. 7).

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