The analysis of procurement risk perceptions within traditional cross-border transactions in food supply networks

In the previous chapter, the trans-European cross-border exchange of food and the flow of international food chains at specific chain levels were identified. This chapter builds on these data, and analyses these food chains and the transaction processes by identifying and assessing the perceived risks typically associated with these cross-border transactions, also assessing operators within the different food supply chains. The same markets were analysed (Germany, Austria, Italy, Spain, Slovenia, Greece, Turkey, the USA and Brazil), maintaining the same four commodity food groups (cereals, meat, fruit and vegetables, and olive oil), for risks perceived by operators in a first-time transaction with a new supplier. The study of first-time transactions is particularly relevant; it is different in nature from a long-term buyer-seller scenario, but is also becoming increasingly common in the emerging new agri-food commodity landscape. The EU agri-food chain is characterized by highly integrated internal processes in the supply chain, and the commodity by nature is highly seasonal, with annual variability in commodity price and availability. The combination of these two factors can lead to instability and bottlenecks in the acquisition of products. Consequently, buyers are becoming increasingly inclined to make contact with new suppliers, possibly also in trans-border transactions, to secure food commodities. The use of e-commerce and globalization of agri-trade flows offer many opportunities for new business-to-business (B2B) partners. However, e-commerce adoption is particularly low in the agri-food sector, with a key barrier to adoption cited as a lack of trust. This chapter aims to identify key risks in trans-border transactions and consequently to provide the foundation for possible mechanisms to reduce that risk perception and create and enforce trust. To achieve this aim, interviews with food chain experts, business leaders and food chain business associations were conducted, to identify key risk potential and risk severity associated with first-time transactions perceived by these operators. In particular, risks associated with the acquisition of the food product groups (cereal, meat, fruit and vegetables, and olive oil) through a trans-European or international exchange were identified with a particular regard for supply chain levels (e.g. production to wholesale trade, wholesale trade to industry or wholesale trade to retail) in each country. A variation of the Failure Mode Effects Analysis (FMEA) was used during the interviews to facilitate the analysis of the perceived risks. This technique will be further discussed within the text. The identification of the factors generating risk in a new trans-border transaction can provide indicators as to how risk perception can be mitigated and how trust can be increased through the use of relevant trust-building features that may vary according to country and commodity. This can provide suppliers with the tools to engage more efficiently with buyers, and facilitate the development of new and successful B2B cross-border transactions.