Assessing Risks in Dairy Supply Chain Systems: A System Dynamics Approach

Abstract

Due to the dynamic nature of the food supply chain system, food supply management could suffer because of, and be interrupted by, unforeseen events. Considering the perishable nature of fresh food products and their short life cycle, fresh food companies feel immense pressure to adopt an efficient and proactive risk management system. The risk management aspects within the food supply chains have been addressed in several studies. However, only a few studies focus on the complex interactions between the various types of risks impacting food supply chain functionality and dynamic feedback effects, which can generate a reliable risk management system. This paper strives to contribute to this evident research gap by adopting a system dynamics modelling approach to generate a systemic risk management model. The system dynamics model serves as the basis for the simulation of risk index values and can be explored in future work to further analyse the dynamic risk’s effect on the food supply chain system’s behaviour. According to a literature review of published research from 2017 to 2021, nine different risks across the food supply chain were identified as a subsection of the major risk categories: macro-level and operational risks. Following this stage, two of the risk groups identified first were integrated with a developed system dynamics model to conduct this research and to evaluate the interaction between the risks and the functionality of the three main dairy supply chain processes: production, logistics, and retailing. The key findings drawn from this paper can be beneficial for enhancing managerial discernment regarding the critical role of system dynamics models for analysing various types of risks across the food supply chain process and improving its efficiency.