Tag: risk mitigation

Guest Post: Looking Beyond Fuel–The Strait of Hormuz’s Connection to the Food Supply Chain

Temple U. Professor Misty Blessley raises a timely issue with her monthly Guest Post.

The Strait of Hormuz closure highlights a risk far greater than rising gasoline prices. The world is facing a potential fertilizer shock that could ripple through the global food supply chain. While headlines often focus on oil, the Strait is also a critical corridor for nitrogen-based fertilizers, especially urea, which depends heavily on natural gas as a feedstock.

Roughly 1/3 of global seaborne fertilizer normally moves through this chokepoint. With passage through the Strait at a standstill, the concern is whether farmers will have access to adequate and affordable fertilizer during this planting season.

Fertilizer and fuel are deeply intertwined. Nitrogen fertilizer is produced by converting natural gas into ammonia. Any disruption in gas supply immediately constrains fertilizer production. Thus, when the Strait is shut down, fertilizer producers will follow in turn. It is reported that nitrogen fertilizer supports approximately half of the global population.

Scotts MiracleGro struggled to keep store shelves stocked during the COVID era demand surge, underscoring how long it can take for a disrupted supply chain to regain equilibrium. This is where the risk becomes acute. Corn, wheat, and rice, major food sources the world over, are among the most nitrogen-hungry crops. Countries that rely heavily on imported fertilizer,
such as India, Brazil, China and the U.S., are especially vulnerable with vast amounts of fertilizer originating in the Middle East. A prolonged disruption could mean lower crop yields, eventually leaving empty space on grocery shelves.

The Strait’s closure is rippling into a food security crisis in slow motion.

Classroom Discussion Questions:
1. Effective risk management requires visibility into every material, its origin, and each step of the production process along the supply chain. How can AI be leveraged to help map these dependencies, identify vulnerabilities, and strengthen risk mitigation strategies? (Refer to Chapter 11 of the Heizer/Render/Munson textbook Figure 11.1 as a multi-tier supply chain example).
2. It is widely estimated that as much as 40% of all food produced is lost or wasted somewhere along the supply chain. Identify organizations working to reduce food waste and discuss what would be required to scale their solutions effectively.
3. In your opinion, is reducing food waste a viable mitigation strategy?

 

Guest Post: The Egg Shortage and Managing Sourcing Risk

 

Temple U. Professor Misty Blessley raises a timely topic.

Chapter 11 of the Heizer/Render/Munson textbook explores strategies for mitigating supply chain risks. This is particularly relevant in considering the current egg shortage. As companies produce less and purchase more, sourcing agents must fully understand the products they are sourcing to effectively manage risks. It is crucial for sourcing agents to consult experts from various fields to understand the causes of the shortage and anticipate future challenges and opportunities. A recent article describes the egg shortage as a “perfect storm of disease, costs, and demand.” The H5N1 bird flu is a key driver, requiring the depopulation of entire flocks when just one bird is infected, according to the USDA. Inflation has also raised the costs of feed, fuel, and labor, while demand spiked during the holiday season. This occurred when 17 million birds were culled, and replacing lost flocks takes months.

Four mitigation strategies can address the shortage:

1. Increased U.S. Domestic Production: Experts predict that domestic egg production in the U.S. will become more productive. Chickens tend to lay more eggs during longer days, temperate weather, and their first 1-2 years of life—conditions currently prevailing in much of the U.S.

2. Increasing Imports: Turkey is being considered as a viable source to increase egg imports. Turkey as the only country from which the U.S. imports eggs.

3. Reconsidering Broiler Eggs: The use of broiler eggs, which are fertilized eggs laid by chickens raised for meat production, is being reconsidered after being banned since 2009. Experts suggest that since these eggs are pasteurized, they could safely be used for products like cake mixes and salad dressings. Broiler eggs are used in animal feed and those unsold have traditionally had to be discarded. Over 5.4 billion eggs have gone to waste.

4. Improved Storage and Transportation: To preserve eggs, firms can implement safer transportation and storage methods. At 0°C, eggs can be stored for about six months. Fresh eggs are highly sensitive to improper storage and can be spoiled if stored near odorous goods.

By implementing these strategies, firms can mitigate disruptions caused by the egg shortage.

Classroom discussion questions:

·1. What are the tradeoffs with the use of broiler eggs?

·2.What other risk mitigation tactics would you consider as a sourcing agent?

Guest Post: DHL Express Delivers to a Global Market

Dr. Misty Blessley, Associate Professor of SCM at Temple U., shares here thoughts with our readers on a regular basis.

“Every supply chain company will have to keep a close eye on big headlines like geopolitics, climate change and wars. If you are a global company, there will be a crisis somewhere, every day,” says DHL Express’s CEO John Pearson, in a recent article in The Economic Times.  DHL Express, he adds, is the undisputed global leader in international express shipping.

Pearson disputes claims that globalization is decreasing, thus making crisis management less of a supply chain concern. In actuality, he states that, “Globalization is not giving way to regionalization and aspects like friendshoring, nearshoring and stronger regional trade are not taking place in a way that makes an impact,” making it as necessary as ever for firms to work through frequent and prolonged crises. For many firms, this has caused globalization to take on a new face.

This new global face comes from adding additional facilities alongside current manufacturing bases, as a means of mitigating risk. India has become a popular location for new manufacturing plants, warehouses and regional offices. “China plus one” is another mitigation strategy by which western firms decrease their Chinese dependence by setting up facilities in Indonesia, India, Philippines, Vietnam, Mexico and Turkey. Chinese firms are doing the same, but they are also the nearshoring exception as they move into Mexico to fulfill their U.S. demand.

How does DHL remain global in a crisis, that is, how does it deliver to a global market every day? It attributes its ability to foresee and anticipate a crisis, and agility for carrying it through. DHL’s pandemic response was rooted in the 2010 Eyjafjallajokull volcano eruption in Iceland, which shut-down air travel in Europe for 30 days. DHL moved to an entirely ground network overnight, by leveraging its available assets and relationships. In sum, DHL scans externally, knows its internal capabilities and learns from the past.

Classroom discussion questions:

1. Refer to the six reasons domestic business operations decide to change to some form of international operation in Ch. 2 in your Heizer/Render/Munson textbook. What advantages propel firms to take on a new global face?
2. Refer to the Logistics Management section in Ch. 11. DHL Express was able to pivot from air to ground transportation in Europe following the volcano eruption. What tradeoffs exist between the various shipping systems?