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Changed Supply Chain Disruption Risks through Installation of a Pasteurizer – the case of Brämhults Juice AB

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Author

Summary, in English

Brämhults Juice AB is a Swedish company producing fresh juice for the Scandinavian market. Fresh juice is rich in taste but has limited durability and must be treated with special care throughout the whole supply chain. Not only will the quality of the product be affected if mistreated, but there are also contamination risks meaning that people actually could get sick, although the risk is very small. There are also other kinds of flow-related risks like single-sourced packages. To reduce the risk of spoiled juice, Brämhults installed a pasteurizer in their production process during spring 2005. An interesting question is how this affected the risks in the supply chain flow. One of the authors (Paulsson 2007) has in another study developed a model, called the DRISC (Disruption Risks In Supply Chains) model, for the structuring, evaluation and handling of risks related to disruptions in the product flow in the supply chain. The DRISC model, seen from the angle of an individual (focal) company in the supply chain, covers all product flow-related disruption risks in the total supply chain from natural resources to the delivered final product, and makes it possible to classify them into 15 different risk exposure boxes, of which 3 boxes have “known result impact” and 12 have “expected result impact”, and also to summarize them in a figure for the total negative result impact. The risk analysis phase of the model is applied in the project to Brämhults juice before and after the installation of the pasteurizer in order to see the effects on the risk "picture". The analysis showed that there was an increase in two of the three “known result impact boxes” and a decrease in the third one. There was also a decrease in eight of the “expected result impact boxes”, and the remaining four were unchanged. Especially interesting is that the three risks linked to market confidence, which before were high or very high, were now all medium. There has also been a change towards comparatively more known result impacts and fewer expected result impacts. The investment in the pasteurizer was about 2 million SEK, and there was a minor increase in the operating costs by 800.000 SEK annually. Since the costs for returns and withdrawals caused by spoiled juice, which before the pasteurizer were about 6 million SEK annually, dropped by about 90 %, the investment has had a payback time of about 5 months. But the pasteurizer also prolonged durability from 10 to 18 days, thereby making it possible for Brämhults to change from distribution by the company’s own drivers and lorries to all the different shops over to transporting to a limited number of DCs (distribution centres) belonging to different food chains. If we split the pasteurizer investment 50/50 on risk and on distribution, we will get a payback time concerning the risk part of the investment of only 2 to 3 months, indicating that it was a very profitable investment. In the costs for returns and withdrawals, only the direct, immediate costs are included. If the negative effects of disruptions on future sales are also considered, the payback time will be even shorter.

Publishing year

2008

Language

English

Publication/Series

LUCRAM, report serie

Issue

1016/2008

Document type

Report

Publisher

Lund University Centre for Risk Analysis and Management, LUCRAM

Topic

  • Business Administration

Keywords

  • Application
  • business continuity management
  • Case study
  • Conceptual model
  • Disruptions
  • Disturbances
  • Food companies
  • Fresh juice
  • Pasteurize
  • Risk estimation
  • resilience
  • Risk
  • Risk handling
  • risk management
  • Risk structuring
  • Pay-back time
  • Supply chain risk
  • Supply chain risk management
  • Vulnerability.
  • Contamination

Status

Published

ISBN/ISSN/Other

  • ISSN: 1404-2983