www.cyberlynx.com.au/
B2B Marketplace
Cyberlynx Procurement Services is an Australian company that provides a solution to reducing indirect or non-core goods and services to a wide variety of clients via the internet.
The business model is pure B2B and delivers tangible benefi ts for both suppliers and buyers through the application of focused resources and economies of scale to enable major organizations to share the cost of strategic sourcing in indirect procurement areas. Cyberlynx focuses on:
• Sourcing goods and services which are non-revenue critical, at a cost that generates a competitive advantage for clients. A process that otherwise would require a signifi cant investment of time, money, resources and technology.
• Harnessing the combined buying power of a network of major client companies to effectively create improved supply chain solutions. These include the Commonwealth Bank Group, Woolworths Limited, Lion Nathan, Telecom New Zealand, Telstra Australia, EDSA, Carter Holt Harvey, Royal and SunAlliance and Nestle.
• Increasing its purchasing categories which include offi ce supplies, travel and travel management, IT products, fl eet management, contract labour, facilities maintenance and print services.
• Fleet management which allows organizations to take immediate advantage of signifi cant cost and process savings.
• Major spend categories reducing the total cost of indirect products and services. In so doing, Cyberlynx allows clients to improve their fi nancial performance and focus on their core business.
Creating value through a disciplined sourcing process plus ongoing process improvement as well as through pooling resources and strategic sourcing. The return comes from aggregation fees on volume spent through the Cyberlynx network.
Information sourced from Cyberlynx website
Collaborative Supply Chain Management
As indicated in Chapter 4, successful collaboration in the business sense means that two or more groups or companies are working jointly to create shared information and can plan their strategies based on that shared information and are then able to execute their plans with greater success than when acting independently.
The reality however is that these arrangements can degenerate into ‘coordination’ rather than ‘collaboration’ (A. Dunne Brisbane, 2005, personal communication) if the participants are not mindful of what drives true collaboration. That is: a collaborative supply chain relationship must be based on trust and this in fact may end up being between organizations that previously may not have considered themselves partners. Strong leadership and change management skills are thus essential ingredients of a successful collaboration effort (Borck, 2001).
Risk and Risk Management
The next section deals with the concept of risk and managing the risk associated with doing business on the internet. So what is risk? Risk is defi ned by Websters Dictionary as:
• The possibility of loss or injury
• Someone or something that creates or suggests a hazard
• The chance of loss or the perils to the subject matter of an insurance contract and/or the degree of probability of such loss
• A person or thing that is a specifi ed hazard to an insurer.
In general terms, risk is generally thought of as the chance of something ‘bad’ happening – thus ‘bad’ and ‘chance’ are two key elements of risk:
• Bad – refers to an event or outcome that is adverse: it is also relative – losing more money is worse than losing less money
• Chance – risk involves uncertainty that an adverse event will occur.
If something ‘bad’ is absolutely guaranteed to happen, there is no risk because uncertainty isn’t present. For example, there is no risk associated with jumping out of an aeroplane without a parachute. You will die, guaranteed. It is stupid, but not ‘risky.’ However, jump out of the plane with a parachute, and you’ll probably live, but there’s a chance you won’t. Thus, most people consider sky-diving risky, but jumping out of a plane without a parachute, suicide.
There are elements of risk in every aspect of running a business – from the operational side of things through to the fi nancial, from the availability of a market through to the whole of business scenario and partner relationship management (Chapman and Ward, 2002; Hillson, 2002 a and b). What makes the situation so much more diffi cult in the eLandscaped world is the rate of change and the uncertainty of what will happen next, thus making conventional forecasting mechanisms diffi cult to operate with any accuracy.
Agribusiness Risk
At whatever level in an agri-industry supply chain, the success of an agribusiness depends on being able to identify, assess, understand, minimize and manage risk. As discussed previously in this book, the agri-industry sector is in the midst of signifi cant change, stemming from shifts in regulations and the impact of globalization. It is also an industry sector which has a number of external to the industry risks associated with it that must be recognized:
• Effects of global warming (e.g. extreme weather events)
• Food safety and security
• Commodity price risk
• Genetically engineered food
• Loss of revenue due to volumetric risk (i.e. inability to supply constant volume and quality)
• Environmental impairment (long term sustainability issues – e.g. salinity)
• Governmental and regulatory reforms
• Accidental and malicious contamination.
At each level in an agri-industry chain aspects of some, or all, of these risks will need to be managed. Take for example commodity price risk management: the rationale for a producer in using this strategy to minimize on-farm risks associated with price volatility in the markets is that market-based tools such as derivatives or hedging instruments (Varangis and Larson, 1996, Varangis et al., 2003) can effectively insulate them from short-term price volatility if used appropriately – see Byte Idea this Chapter on ARMS. The same applies to a trader further downstream in the chain. There are two basic types of risk management tools in common use (Varangis and Larson, 1996):
1. Futures contracts. These involve the buyer (or seller) of a futures contract agreeing to purchase (or sell) a specifi ed amount of a commodity at a specifi ed price on a specifi ed date. Contract terms (for example, amounts, grades, delivery dates) are standardized, and transactions are handled only by organized exchanges. Profi ts and losses in trades are settled daily through margin funds deposited in the exchange as collateral. Futures contracts are usually settled before or at maturity, and do not generally involve physical delivery of the product.
2. Options contracts. These offer the right but not the obligationto purchase or sell a specifi ed quantity of an underlying futures contract at a predetermined price on or before a given date. Like futures contracts, exchange-traded options are standardized, over-the-counter options offered by banks and commodity brokers. Purchase of an option is equivalent to price insurance and therefore requires that a price (premium) be paid. Options include:
calls (which give the buyer the right to buy the underlying futures contract during a given period and are purchased as insurance against price increases) and puts (which give the buyer the right to sell the underlying futures contract during a given period and are purchased as an insurance against price declines).
Throw in the risks associated with electronic enablement of the business and/or industry specifi c supply chain risks and risk management has become a very large chunk of an agribusiness manager’s portfolio.
In the following sections, risk and risk management in general within a business are briefl y described before the chapter moves into risk management associated with electronic enablement.