Risk Management in Dairy Contracting

A Study in France, Australia, and the United States

 

STUDENT PAPER

By Angel Tania

SKEMA Business School

Lille, France & Indonesia

 


 

ABSTRACT

Dairy products are consumed on a daily basis by people all over the world. The dairy consumption is forecasted to grow to 234 metric tons by the year 2021[1]. Despite the growth, this industry faces challenges. This paper discusses the risks in dairy contracting found in France, Australia and the United States; what are the risks in contracts within the projects in the dairy industry? What factors trigger those risks? How can we improve the contract clauses so that a fairer agreement to all parties can be achieved? Through cause-and-effect analysis, the root causes of the risks are identified. Then, multi-attribute decision-making model is used to determine the best solution to manage these risks based on Project Management method. Thereafter, Force-Field analysis is used to identify best practices in dairy contracting based on the practices done in the aforementioned three countries. In the end, it can be concluded that the government possesses a vital role in dairy contracting fairness, especially in establishing standards and protecting all stakeholders involved.

Keywords: Contract Management, Challenges, Dispute, Conciliation, Pricing, Contract Fairness, Milk Quota, Risk Transfer

INTRODUCTION

Despite a period of turbulence the global dairy sector is currently facing, “the global demand forecast for dairy is expected to increase by 2.5% annually to 2020”. This expected rise is mainly driven by the rising population and their changing diets towards receiving more of their calories from proteins, especially dairy products[2]. In regards to the growth, it is indisputable that the dairy industry has suffered from numerous scandals in recent times. Modern customer’s value when making food choices has also evolved. Customer nowadays weighs in the factor of health, wellness, and social impact while making their buying decision. It is due to these reasons that the dairy sector has been attempting to innovate, and one of the ways to achieve that is through projects. “Milk producers are cooperating with research organizations and universities through several projects to enhance their knowledge about the composition of dairy products so that new options for adding value to milk and its components can be offered to customers”[3].

With an escalation in the number of projects within the dairy industry, the project management knowledge has been more important than ever. The term project itself has been defined in various ways. According to the Global Alliance of Project Performance Standards (GAPPS), a project could be “the preparation of the feasibility study, the creation of a research report for a consumer products company, or the implementation of a new information technology system.”[4] The International Project Management Association (IPMA) describes a project as a “unique, temporary, multi-disciplinary and organised endeavour to realise agreed deliverables within predefined requirements and constraints.”[5] Therefore project management, according to the Wideman’s Glossary of Project Management Terms can be defined as “the process of directing and coordinating human and material resources throughout the project lifespan to achieve established objectives of scope, quality, time, cost, and stakeholder satisfaction.”[6] This definition includes the management of resources in order to achieve objective. Thus, one of the essential factors that need to be organised in projects is contract management. Managing resources within project requires the project manager to comprehend the globally applied fundamentals of contract and procurement of resources. Especially in the dairy industry where numerous stakeholders are involved ranging from government, companies, farmers, to consumers. A well-established contract management within projects can help the project managers to manage risk, perform strategic alignment, manage complexities, and increase the project success[7].

Project management in dairy sector is involved in a complex environment, in which many stakeholders are involved, there are numerous requirements from the government and trade union, and volatility of price can impact the project at any time. One of these complexities also include the challenges posed by the contracts formulated within the project[8]. Figure 1 depicts the four root causes analysis of the elements that possess a big impact on contract management in projects within the dairy sector.

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Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director paul.gardiner@skema.edu.

How to cite this paper: Tania, A. (2019). Risk Management in Dairy Contracting: A Study in France, Australia, and the United States, PM World Journal, Vol. VIII, Issue VII, August.  Available online at https://pmworldlibrary.net/wp-content/uploads/2019/08/pmwj84-Aug2019-Tania-Risk-Management-in-Dairy-Contracting.pdf

 


 

About the Author


Angel Tania

Lille, France

 

 

 

Angel Tania is a Project Management professional with Finance background. Born in the world’s largest archipelago, Indonesia, she was granted a scholarship to pursue her Bachelor’s degree at Hogeschool van Arnhem en Nijmegen (University of Applied Science) in the Netherlands, majoring in International Finance & Control. During her study, she had the chance to work as a trainee in the biggest dairy company in the Netherlands; Royal Friesland Campina, before being hired as an external Business Process consultant at TNT Express (now a subsidiary of FedEx). She also pursued a minor degree in Risk Management and Entrepreneurship at Glasgow Caledonian University, Scotland before embarking on a further master study at SKEMA Business School, France.

Angel lives in Lille, France and can be contacted at ursulangeltania16@gmail.com

 

[1] Dairy Industry Overview. (2018). Retrieved from https://www.statista.com/topics/4649/dairy-industry/

[2] McMahon, M. (2017). Challenges and Opportunities in the Dairy Sector. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/ie/Documents/ConsumerBusiness/ie_Dairy_Industry_Trends_and_Opportunities.pdf

[3] Research in the area Dairy Science and Technology. (2018). Retrieved from https://www.wur.nl/en/Research-Results/Projects-and-programmes/Dairy/Research.htm

[4] GAPPS. (2007). A Framework for Performance Based Competency Standards for Global Level 1 and 2 Project Managers. Sydney: Global Alliance for Project Performance Standards. Retrieved from https://globalpmstandards.org/wp-content/uploads/2014/12/GAPPS_Project_Manager_v1.1150411_A4.pdf

[5] Schoper, Y., & Viehbacher, A. (2015). Individual Competence Baseline for Project Management. IPMA. Retrieved from http://products.ipma.world/ipma-product/icb/read-icb/

[6] Wideman, M. (2018). Wideman Comparative Glossary of Project Management Terms v5.5. Retrieved from http://www.maxwideman.com/pmglossary/PMG_P16.htm#Project%20Management

[7] Graham, R. (2018). Contract Management Skills for Project Managers – PMO Perspectives. Retrieved from https://www.strategyex.co.uk/blog/pmoperspectives/contract-management-skills-for-project-managers/

[8] Vavra, P. (2009). Role, Usage, and Motivation for Contracting in Agriculture. OECD Food, Agriculture, and Fisheries Working Papers. Retrieved from https://www.oecd.org/tad/agricultural-trade/43057136.pdf