Robustifying Supply Chains against Corruption Risk: A New Zealand Dairy Industry Study Using System Dynamics

Abstract

Studies on dairy supply chain risk management (SCRM) primarily cope with specific risks or partial supply chains. Little research focuses on risk management from a comprehensive perspective. Risk interactions lead to ultimate supply chain performance (SCP). Thus, a systemic study on dairy SCRM contributes to exploring the complexity of this supply chain. Corruption in supply chains would negatively affect businesses, and has attracted increasing concerns. However, research on corruption within supply chains is largely overlooked. Corruption risk in supply chains is identified as a research gap. This research explores how corruption modifies the effects of supply chain risks (SCRs) and thereby SCP in the dairy sector, and develops mitigation strategies to robustify supply chains against corruption risk. This research critically reviewed literature on corruption, SCRM, corruption as a risk factor in the supply chain, supply chain robustness against corruption, and corruption risk in the context of dairy supply chains. Accordingly, research gaps and research questions were formed. A conceptual framework was developed to exhibit the research process and research methods. This research adopted in-depth case studies in New Zealand dairy companies, substantially covering the entire dairy industry in this country. Thematic analysis was performed on interview data primarily collected from high level managers. Case studies identified risk factors for primary risk events in New Zealand dairy supply chains, as well as the impacts of corruption. Examining the interactions amongst SCR variables and corruption contributes to a high level picture. System dynamics (SD) modelling was consequently employed to explore underlying dynamic relationships among variables. Both direct and indirect impact of corruption on the supply chain can be expected to be investigated through simulation. By integrating corruption’s impact with supply chain operations, this research is unique in applying the concept of robustness to mitigate corruption risk. This study defines and manages leverage risks, which minimise the impact of corruption on SCP and thereby enhance supply chain robustness against corruption effectively. Keywords: Corruption, SCRM, Dairy SCRs, Supply chain robustness, Case study research, SD modelling