Fragile Food Supply Chains Reacting to Risks

Introduction The food supply chain despite being heavily regulated is increasingly in the spotlight for safety scares, recalls and disruptions. Public focus on these issues has also grown following increasing consumer concerns and its consequential costs imposed on the society.(Fearne, Hornibrook et al. 2001). Food supply chains of today are particularly fragile owing to the geographic, economic and legislative spread of participating entities and any materialisation of risk quickly permeates across its different entities. The impact of risk materialisation can be catastrophic both to the customer as well as the organisation as witnessed in the case of salmonella poisoning in the recent peanut butter case (FDA 2009) and melamine poisoning in the recent Chinese milk scare (Fairclough 2008) or can be used by the organisation to strengthen its position in the market and increase public loyalty. As seen in the case of the response to hurricane Katrina, Wal-Mart (Leonard 2005) and P&G coffee brand (Carberry 2007) were able to take timely action and provide humanitarian support in the affected areas. A recent research by Singhal (2005) states that the average stock market impact following a supply chain disruption announcement was a drop of 7.5 percent. In the category which included food industries the drop in the stock value immediately preceding the announcement was 6.6 percent. This indicates that the announcement of any disruption or ‘glitch’ can have a significant reaction to the company’s value. The research also points out that this figure is higher than the corresponding values following IT and financial disruption announcement.