Making dairy supply chains robust against corruption risk: a systemic exploratory study

• Published date: 11 November 2019
• DOI: https://doi.org/10.1108/IJLM-02-2018-0039
• Pages: 1078-1100
• Date: 11 November 2019
• Author: Xiaojing Liu,Tiru Arthanari,Yangyan Shi
• Subject Matter: Management science & operations

Making dairy supply chains

robust against corruption risk:

a systemic exploratory study

Xiaojing Liu

Department of Information Systems &Operations Management, Business School,

The University of Auckland, Auckland, New Zealand and

Department of Management Science and Engineering,

School of Economics and Management,

Zhejiang Sci-Tech University, Hangzhou, China

Tiru Arthanari

ISOM Department,

University of Auckland Business School, Auckland, New Zealand, and

Yangyan Shi

College of Economics and Management,

Nanjing Agricultural University, Nanjing, China;

Department of Management, Macquarie Business School,

Macquarie University, Sydney, Australia and

Centre for Supply Chain Management,

University of Auckland, Auckland, New Zealand

Abstract

Purpose –To improve robustness of a dairy supply chain (SC) against corruption, the purpose of this paper

is to propose a systemic model of a corruption impacted dairy SC, exposing relationships among SC

operations, risks and the impact of corruption.

Design/methodology/approach –Cases from the dairy industry in New Zealand (NZ) are used for

thematic analysis of interview data collected from participants at senior levels of NZ dairy firms. Based on

these and other inputs from literature, a systemic model is built subsequently.

Findings –Mitigating certain risks can significantly alleviate the impact of corruption, an external factor, on

supply chain performance (SCP). The causal loop diagram (CLD) developed here brings out the modifying

effect of corruption on dairy risks and SCP.

Practical implications –The illustration of the CLD helps business managers better understand the

interactions among risk variables and explains the systemic reasons for SC vulnerability.

Originality/value –This is the first paper to construct a holistic system to comprehensively reveal the

interactionsof supply chain risks (SCRs) and the impact of corruption.Also, by utilizing SCR interactions,this

studyindicates a pathway to mitigatethe negative effectsof corruption throughimproving dairy SC robustness.

Keywords Australia, Process management, Qualitative interviews, Supply chain risk

Paper type Research paper

1. Introduction

Corruption is “the abuse of entrusted power for private gain”(Transparency International, 2018),

and has various forms, including bribery of public officials, bribery and embezzlement in the

private sector, trading in influence, obstruction of justice and abuse of function (United Nations

Global Compact, 2010). From the perspective of supply chains (SCs), private-to-public corruption

The International Journal of

Logistics Management

Vol. 30 No. 4, 2019

pp. 1078-1100

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-02-2018-0039

Received 16 February 2018

Revised 29 August 2018

10 April 2019

19 July 2019

Accepted 19 August 2019

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

The authors acknowledge the sponsorship of “A project funded by the Priority Academic Program

Development of Jiangsu Higher Education Institutions (PAPD)”and Fundamental research funds for

the central universities of China (Project No. SKCX2018002).

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IJLM

30,4

(companies bribe government officials for contracts or services) only occupies a minor proportion

(Transparency International, 2009). Different researchers study corruption from varying

perspectives like culture, economy and politics. Lack of systemic research on corruption led Ullah

and Arthanari (2011) and Ullah et al. (2012) to integrate variables related to corruption in various

realms into a holistic system. These studies present a high-level system dynamic model of the

complex interactions among such variables. Corruption is a matter of concern, also due to the

disastrous impacts and penetration over the whole SC. However, research works on corruption

from the perspective of SCs are rather limited (Arnold et al., 2012; Webb, 2016). Prevention of

corruption involves high cost (United Nations Global Compact, 2010). Low cost-effectiveness of

preventive strategies motivates exploration of ways to mitigate corruption’simpactonSCs.

The complexityof SCs arises from interrelationships and interdependenciesamong entities

in the supply system(Ghadge et al., 2013). Such interdependencies lead to uncertainty (Pfeffer

and Salancik,1978), and SCs are thus exposed to disruptions in various processes.Corruption

would increase the complexity of disrupted SCs. The effect of SC disruptions could be

modified in the presence of corruption. However, the impact of corruption on SCs is lack of

elaborate research; also, no research focuses on how to mitigate corruption’simpactonSCs.

Proactive and reactive strategies are recognized to improve resilient ability of firms

(Wieland and Wallenburg, 2012, 2013), i.e., robustness (proactive) and agility (reactive).

Wieland and Wallenburg (2012) suggest more robustness studies are needed, and

robustness is defined as “the ability of a supply chain to resist change without adapting its

initial stable configuration.”A robustness strategy cannot deal with all SC disruptions,

and “robustness against something”is highlighted as an important aspect in Monostori’s

(2018) study.

This paper investigates robustness against an external factor –corruption, which

modifies the effect of internal factors (i.e. supply chain risks (SCRs)) and consequently

modifies supply chain performance (SCP). This adds to robustness research by offering a

new perspective. Meanwhile, enhancing SC robustness against corruption complements the

purpose of mitigating corruption’s impact on SCs.

As a sensitive topic, corruption within SCs has not been well elaborated in industrial

practices. The nature of this topic determines the difficulty of data collection. The sensitivity

inhibits participants from free expression of their perceptions. Choosing New Zealand (NZ),

one of the least corrupt countries, is beneficial to reducing sensitivity in the process of data

collection. In terms of businesses, NZ still needs to fight against corruption, since there is

little relationship between national corruption level and actual bribery performed by its

firms ( Jeong and Weiner, 2012). Further, we collected empirical data in NZ dairy industry to

operationalize this research. Consecutive crises in the dairy sector result in heightened

concerns in firms and individuals about product quality and safety. NZ is an international

leader in producing and exporting dairy products, with more probable exposure to

corruption. Its dairy industry forms a large portion of export, taking up 3.5 percent of the

national GDP (Ballingall and Pambudi, 2017). NZ dominates 28 percent of the international

dairy trade, and only less than 4 percent of the production of milk is served to the domestic

markets (Shadbolt and Apparao, 2016).

The purpose of this study is to provide a ground study for robustness analysis against

corruption, with empirical data collected from NZ dairy firms. There are three major

research questions:

RQ1. What types of SCRs exist in the NZ dairy industry?

RQ2. How does corruption modify the effect of dairy risks and SCP?

RQ3. How does a firm improve SC robustness against corruption from the perspective of

a holistic system?

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Making dairy

SC robust

against

corruption risk