Tag: resilience

Guest Post: Building Resilient Supply Chains Through Sourcing Risk Management

Temple U. Prof. Misty Blessley shares her insights with our readers monthly.

In Ch 11 of your Heizer/Render/Munson textbook, the importance of buyer-supplier collaboration is discussed. In collaborative relationships, firms manage risk by working jointly to anticipate and address sourcing challenges, thereby fostering resilient supply chains. 

Hershey, the iconic American confectionary company, offers a compelling example of collaboration in action. Confronted with unprecedented cocoa market volatility, Hershey strengthened its partnerships with farmers, NGOs, and governments. Through its Cocoa For Good initiative, the company committed $500 million to improving sustainability and stability in the cocoa supply chain. This includes investments in farmer livelihoods, agronomic training, and expanded market access. Hershey’s desire to collaborate is rooted in the belief that a resilient supply chain starts with a resilient farming community.

Global coffeehouse chain, Starbucks, employs a similar collaborative model in the coffee industry. It’s Coffee and Farmer Equity practices enable direct engagement with producers across Latin America, Africa, and Asia to improve sustainability, productivity, and income generation. Starbucks operates regional farmer support centers, provides pre-harvest financing, and integrates ethical sourcing into its procurement decisions. These long-term collaborations help Starbucks secure a dependable supply while positively impacting over 400,000 farming families.

In contrast, Taylor Farms, a major North American producer of fresh-cut fruits and vegetables, exemplifies a different risk management strategy– backward vertical integration. Rather than relying on external suppliers, Taylor Farms owns and operates its farms in addition to its processing, packaging, and distribution facilities. By controlling the key upstream stages from seed selection to harvest, the company reduces dependency on independent growers. Its farm-to-shelf model demonstrates how owning the supply base can offer long-term resilience.

Transactional buyer–supplier relationships often reflect a zero-sum mindset, where one party’s gain comes at the other’s expense. In contrast, the strategies employed by Hershey, Starbucks, and Taylor Farms showcase the value of moving beyond transactional interactions in pursuit of win-win partnerships/ownership to manage sourcing risk and assure resilient supply chains.

Classroom discussion questions: 

  1. Hershey and Starbucks manage upstream risk through collaboration, while Taylor Farms does so through backward vertical integration. Both strategies aim to strengthen supply chain resilience. What unique challenges do the two approaches pose for supply chain managers?
  2. Transactional supplier relationships often focus on short-term cost savings rather than long-term stability. Based on the strategies used by Hershey, Starbucks, and Taylor Farms, what specific risks do transactional relationships present in building resilient supply chains?

Guest Post: How Fastenal Weathers the Storm

Temple U. Professor Misty Blessley shares her insights with our readers monthly.

The Atlantic hurricane season in the U.S. runs from June through November, with most hurricanes making landfall between Florida and Texas. The National Oceanic and Atmospheric Administration (NOAA) has forecasted that the 2024 hurricane season could be one of the busiest on record. Hurricane Beryl, a Category 5 storm that struck Houston on July 8, is the earliest such hurricane in Atlantic history, setting a severe tone for the season. Ensuring access to supplies when and where they are needed is crucial for the region’s ability to withstand and recover from hurricane-related disruptions.

Here is the contingency plan for Fastenal, an international industrial and supply solutions company. The season began with Fastenal’s onsite team stationed at a Phillips 66 refinery in Texas, directly in Hurricane Beryl’s path. Due to the sensitive nature of their operations, refining companies must manage weather events with extreme care, which is why Fastenal staffs these sites with onsite personnel. Hurricane Beryl’s impact went beyond refineries, temporarily halting operations across Houston’s maritime, air, and motor carrier sectors, affecting numerous businesses.

In addition to its mitigation efforts with Phillips 66, Fastenal’s plans to bolster the region’s resilience, include:
 A corporate communication channel for providing rapid support to customers in affected areas.
 Ample stocks of hurricane-specific supplies, such as generators and water, at four major distribution centers (Dallas, Houston, Atlanta, and Jackson, Mississippi).
 Having distribution teams on standby to deliver supplies to affected areas as soon as access is granted.
 A private fleet allowing for quick and flexible response.

As highlighted in Chapter 11 of your Heizer/Render/Munson text, “Companies need to focus not only on reducing potential disruptions but also on how to prepare for responses to inevitable negative events.” Fastenal credits the company’s dedicated staff and advanced technology—such as its warehouse management system, which can handle both planned and unplanned orders—for its ability to respond to crises like Hurricane Beryl.

Classroom discussion questions:
1. In Table 11.3 supply chain risks and tactics are covered. Which of the risk reduction tactics is 2most beneficial in the event of a catastrophic weather event?
2. Review other weather-related disruptions and identify contingency plans. Hint: Icelandic volcano eruptions and Texas snowstorms