Issues of Supply Chain Expansion and Their Mitigtion Report 2022

Murray Meats International 1
ISSUES OF SUPPLY CHAIN EXPANSION AND THEIR MITIGATION
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1. Executive Summary
Risk management in every supply chain is important, especially because most
supply chain transactions include taking risks and making necessary changes to
sustain progress in any company’s economic development. Risk management in a
supply chain perspective involves dealing with issues that occur within the company
internally, and those that occur along the supply chain. For example, involving
transport logistics.
This report investigates the issues that Murray Meats International may face in
the supply chain regarding the changes that it is planning to make in its supply chain.
Some of these decisions include expanding to international markets, partnering with
a new company to handle their logistics, and establishing a new production plant.
Challenges they may face include; financial issues, high tax rates, and tariffs, and
global regulations involving transport such as green logistics.

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Contents
1. Executive Summary....................................................................................................................2
2. Introduction..................................................................................................................................5
2.1. Risk Management in the Supply Chain perspective.......................................................5
3. Discussion....................................................................................................................................6
3.1. Supply Chain Issues and challenges...............................................................................6
3.1.1. Financial Issues...........................................................................................................6
3.1.2. Tax rates and Tariffs...................................................................................................6
3.1.3. Market Uncertainty......................................................................................................7
3.1.4. Outsourcing Challenges.............................................................................................8
3.1.5. Global Regulations......................................................................................................8
4. Recommendations......................................................................................................................9
4.1. Mitigating the risk of Expanding Plant Operations..........................................................9
4.1.1. Running Simulation tests prior to Actualization.......................................................9
4.1.2. Financial Planning.....................................................................................................10
4.2. Mitigating the Market Expansion Risk............................................................................10
4.2.1. Research and Technological advancement..........................................................10
that have been successful in market penetration (Kumar et al., 2016)............................10
4.2.2. Investing in Advertisements.....................................................................................10
4.3. Mitigating the Partnership Risk........................................................................................11
4.3.1. Eliminating the Bullwhip Effect................................................................................11
5. How to Achieve a More Integrated Supply Chain.................................................................11
6. Conclusion.................................................................................................................................12

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References........................................................................................................................................13

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2. Introduction
Company supply chain management involves the control of current logistics and
production operations. For Murray Meats International, its supply chain begins with
the livestock farmers to the three production plants in Murray Bridge, Toowoomba,
and Griffith. The consumer product is then transported to domestic and international
markets. The company has strived to maintain the quality and integrity of its products
by complying with the standards that regulate meat quality in order to achieve
customer satisfaction and, in the process, maintain its market.
In addition to maintaining current supply chain operations, supply chain
management should also involve a constant evaluation of the state of business,
finding ways in which the company can improve the efficiency of their production and
supply systems for better profits. An endeavor to improve the supply chain may
involve taking risks like expanding the production line to increase the throughput or
outsourcing the transport services to third-party logistics providers. When a company
takes risks, its major expectation is usually a positive contribution to the current state
of transactions. It is, therefore, important for companies to follow risk management
steps such as; identifying the imminent risk, assessing its effects, and mitigating the
risk, or avoiding it if possible.
2.1. Risk Management in the Supply Chain perspective
Looking at risks in the supply chain perspective means consideration of risks that
occur along the supply chain. These are issues and challenges that affect the
decisions that are made in the normal transactions of the supply chain. These issues
may be internal, as in issues affecting the production process; or external issues that
affect the supply chain in general (Maheshwari and Jain, 2014).
Murray Meats International is aiming at taking three major steps in its company
operations. These three are; expansion of plant operations, expanding their market
share globally, and outsourcing their supply logistics to an overseas partner. These
are major supply chain risks that can lead to issues in the supply chain. This report
identifies some of the issues that the company may face in the implementation of
these progress steps. It also details recommendations in which the risks can be
mitigated.

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3. Discussion
3.1. Supply Chain Issues and challenges
3.1.1. Financial Issues
Changes that are made in the supply chain always have implications on the
cost of production and the overall transactions in the supply chain. Considering the
step to expand production through the introduction of a new processing facility in
Adelaide means an addition to the company’s budget. An increase in the normal
company budget implies that the company has to seek for loans in order to see the
completion of this project. In the event that the company does not seek aid from
loans, the expenditure on the new project provides a financial load on the company's
income, which may lead to cutbacks in normal expenditures. An example of these
cutbacks is delayed in meeting employee incentives and Collective Bargaining
Agreement (CBA), leading to employee dissatisfaction and, as a result, a negative
reflection on work performance.
Financial issues can also arise as a result of losses due to the failure of the new
project. An introduction to the new factory with state-of-the-art technology is meant to
serve the company for a long time. It, therefore, needs to be accurate in
implementation (Martin and Leurent, 2017). In a case where it does not fit well with
the production method of the company, it can incur tremendous losses. Failure from
such a project can occur as a result of implementing the project without running
simulations in order to forecast the outcome before investing in the real project.
As the company plans to partner with Charoen Pokphand Group, who is to
handle their global logistics, there is a possibility of financial issues arising from
contractual transactions. The company has not taken this step before, so the CP
group may charge a huge amount of fixed costs to seal the contract. This increases
the cost of market expansion.
3.1.2. Tax rates and Tariffs
Tariffs and tax rates that are imposed by governments is one of the major issues
that companies face as they internationalize. This is done in a bid to increase their

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revenue and protect their domestic industries from intense competition. An example
of these tariffs is the tariffs that the USA imposed on the Chinese, Canadian, and
European Union products in the year 2016 (Radcliffe, 2019). The Chinese
government, in retaliation, also imposed similar tariffs on American products such as
steel. Such tariffs can reduce the chances of a new supplier penetrating into
international markets.
Tariff rates for Australian beef products in some Asian and countries are as
follows:
Country Tariff rates (%)
China 4.8
European Union 12.8
Japan 25.8-28.2
A country like China is a major importer of Australian beef products; tariff rates
are therefore relatively low. They are meant to drop under ChAFTA in 2024 (Meat &
Livestock Australia, 2020). Tariffs in other countries are relatively high. Tariff rates
shift with a change in political relations between countries. It is, therefore, a
challenge to navigate new trade regions where trade agreements have not been
established yet. With high tariff rates, prices of goods become quite hard for
consumers who end up refraining from buying. As a result, the market for these
products stagnates in growth.
3.1.3. Market Uncertainty
When establishing new markets, the major challenge is usually the uncertainty
about the reactions of local people to new products. Customers are usually reluctant
to try new products in the market because they are uncertain about the quality and
integrity of the products (Sinha and Swati, 2014). They are also loyal to brands that
they have been purchasing in the market, making it hard for new products to gain
popularity. The main challenge to a company like Murray Meats International is
identifying customer tastes and preferences in terms of meat varieties and flavors.
The other challenge is coming up with incentives and promotions that will accurately
make consumers shift to their products (Hope, 2015).

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Another form of uncertainty that arises when expanding to international markets
is stiff competition with the local companies (Mubarak, 2016). Most countries try to
protect their local products from the competition by imposing high tariffs on imported
products. These companies further incur additional costs from levy duties imposed
by governments. This makes it quite expensive for a company that is going global to
establish roots. The issue of market competition is huge for a company like Murray
Meats International. It is especially major in countries where their products are
completely new. They may even be forced to reduce their prices a bit in an attempt
to make their products more preferable to the local population.
3.1.4. Outsourcing Challenges
Outsourcing means delegating some supply chain responsibilities to other
organizations or parties. Levels of outsourcing range from in-house, where a
company handles its own logistics to third-party logistics (3PL). Murray Meats
International is venturing into the 3PL form of outsourcing by partnering with the
Charoen Pokphand Group. The challenge that arises from partnering with 3PL
providers is the ability to come into agreement with terms and conditions that are
documented in a contract. Outsourcing to 3PL means that all the company's
operations involving land transport, shipment, and distribution are in the hands of
3PL providers. The company, in this case, loses total control of their logistics
(Nedović, 2015).
In a case where the company does not have any direct control over their
logistics, there is a need to ensure that the 3PL services match the quality and
expectations of the company. With outsourcing, the 3PL perform their tasks
independently. They may deliver the company's products late, leading to customer
dissatisfaction and loss of market as a result.
Another problem that companies are facing when using 3PL is cybercrimes and
theft (Weir and Yates, 2016). The logistics industry is going digital, and 3PL
companies are controlling their operations using Industry 4.0 tools such as the
Internet of Things (IoT). Technology can easily be hacked. When hacking occurs,
goods in transit can easily be stolen or destroyed. This problem faces 3PL providers
directly but causes the supplier companies to lose their products resulting in loss of
income (Zalud, 2016).

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3.1.5. Global Regulations
Global trade unions put in place regulations to promote peaceful trade and
ensure that business operations do not interfere with the environment and
ecosystem. An example of these regulations is the drive for green logistics in the
supply chain. Most governments worldwide are putting regulation measures on
waste discharge, CO2 emissions, and other greenhouse gas emissions (Wang et al.,
2018). As it establishes a new production plant, the company is faced with the
challenge of including appropriate waste disposal facilities in their plant to keep up
with the regulations.
The addition of a fourth production plant increases the company's production
capacity hence widening the supply chain. This increases the number of transport
facilities used, resulting in an increase in environmental emissions. With these, the
company has a task to impose policies that can reduce environmental pollution in its
supply chain (Sehlleier et al., 2017).
Global regulations can also be in the form of cultural and ethical regulations and
laws that are adhered to, in particular countries. The company faces a challenge of
understanding these regulations and inclining their business towards the positive
side. For example, when coming up with advertisements and promotions, it is
important to understand the local culture and ethics. This is because it is easy to
come up with offensive content in advertisements if caution is not observed (Abner,
2015).
4. Recommendations
4.1. Mitigating the risk of Expanding Plant Operations
Expansion of company plant operations poses financial challenges to the
company. The company is also bound to face issues concerning green logistics
measures. These challenges can be curbed in the following ways:
4.1.1. Running Simulation tests prior to Actualization
Technological advancements have made industrialization easier. It provides
the possibility for companies and firms to run tests on their projects before
implementation. Discrete event simulation soft wares such as Tecnomatix Plant
Simulation are very useful in designing new plants (Ahmed and Robinson, 2014).

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They can reduce the state of uncertainty on the company's side as different
scenarios are integrated into the tests, and outcomes are foreseen. This step can
greatly reduce losses that are imminent from the implementation of a risky project.
4.1.2. Financial Planning
Financial planning and budgeting for the introduction of a new project is a task
that should involve all the departments in a company. Construction of the new
factory in Adelaide is a project that is to go on for quite some time. It is, therefore, the
company's responsibility that the funds allocated are sufficient to bring it to
completion. A financial plan should give details of all the facilities that are to be
included in the project. It should also give a forecasted cost value of these facilities
from the beginning to their conclusion (Roper and Payant, 2014). A financial plan
should give an allowance for inflation risks and future uncertainties. To make it
effective, the company’s financial department should constantly review the plan to
ensure its relevance.
4.2. Mitigating the Market Expansion Risk
4.2.1. Research and Technological advancement
The company’s ability to identify a gap in the market determines the success
of expansion to an international market. There are stiff competition by-products from
the local markets. The company should, therefore, be able to devise ways in which
they can pick up popularity among consumers. This can be done through extensive
market research. It is a step whereby the company needs to send analysts to
determine the market situation in their target areas. It can also be done by evaluation
of companies that have been successful in market penetration (Kumar et al., 2016).
To achieve an accurate evaluation during research, companies are turning to
the market evaluation of soft wares. Murray Meats International needs to invest in
information technology to obtain the best results from evaluation tools. The company
can take advantage of these to get informed on the rates and tariffs of countries it is
targeting, thus eliminating the risk of excessive losses from taxes.
4.2.2. Investing in Advertisements
The most effective way in which a supplier can make consumers informed
about their products is through advertisements and promotions. Expansion to new
territories is similar to the introduction of new products. The customers are not aware

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of the products and, therefore, do not have a reason to purchase them. Campaigns
and advertisements should be inclusive of all people. The company may consider
the use of mass media, the internet, and social media. This is because most people
are growing fond of new technology. The advertisements should, therefore, be
appropriate and appealing to consumers (Osano, 2019).
4.3. Mitigating the Partnership Risk
To ensure customer satisfaction in a supply chain, the company should work
closely with its partners to ensure that supply meets demand at the right time and
quality. The company should establish good relations with their distributing partner
by engaging in a fair contractual agreement. Good relations between partnering
companies also give the producing company a sense of more control over its
logistics (Son and Djuatio, 2019).
4.3.1. Eliminating the Bullwhip Effect
As the company goes global, the supply chain becomes long and complex. There
is a great possibility of information distortion in the supply chain. To deal with
information distortion in the supply chain, there is a need for Murray Meats
International to establish the link and close communication with their distributing
partner. The company can achieve this by taking advantage of technology and the
internet.
There are many soft wares that have been developed for the purpose of linking
suppliers, 3PL providers, and their customers. With the adaptation of these
communication tools, the company will be able to connect with their customers and
their partner on issues of the supply chain. As a result, the bullwhip effect reduces
saving the company from losses caused by an oversupply in the inventory.
5. How to Achieve a More Integrated Supply Chain
The main goal of supply chain integration is to reduce the costs of navigation
along the supply chain. There is also a need to also offer better services and quality
products to consumers. There is, therefore, a need to improve integration in the
overall supply chain (Yuen and Thai, 2016).
Supply chain integration is achieved most effectively through the use of the
internet and technology. The internet has made communications very easy. With

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applications such as Skype and Zoom, companies are able to hold meetings online,
hence easing communication and reducing the cost of travel (Bharadwaj et al.,
2013).
The company needs to establish its own website where their customers are
constantly updated on new products. The customers also get the chance to give
feedback on the quality of products to their suppliers. This way, the company has a
chance to grow by working on its mistakes.
6. Conclusion
Risk management is an important part of supply chain management. The
company, Murray Meats International, is taking development risks in its supply chain,
including building a new production plant and expanding to international markets.
With these risks come challenges like financial constraints and market uncertainty.
These challenges can be curbed by adopting technology, strategic financial
planning, and improvement of supply chain integration.

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