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Janets Pots

Supply Chain Management System

REF001

Version 1.0

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Janets Pots Supply Chain Management

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6. Positive Impacts of Implementing an SCM System 117. Negative Impacts and Risks 178. Solutions to Avoid Negative Impacts 199. Conclusion 23

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1. Executive Summary

Objective

Goals

Solution

Aenean iaculis laoreet arcu

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2. Introduction

Terms of Contract

Fairfax require us to produce and deliver 250 jars a week to 200 of its putlets nationwide. This means a five-fold

increase in production levels and at the same time meeting the supermarkets demand in terms of quality, timeliness of delive ry,

cost of goods, special promotions and point of sale material which we believe we are easily capable of handling.

Condition(s)

The contract has been awarded for a one -year period which will only be extended if we implement a formal supply

chain management system that can link via the extranet to Fairfax Supermarkets SCM system.

The purpose of this document is to explain the implementation of Supply Chain Management into Janets pots and to

discuss the main elements of supply chain management with the usage of technology. The psitive and negative impacts would

also be discussed with the solutions to mitigate the negative effects and the risk management will be a key factor.

3. Current System Analysis

Current Information Technology and System Assets

At present, we have the following system in place,

y 5 x free standing workstations all connected to the world wide web

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y All contain the Microsoft Office 2007 software

Limitations of the Current System

Local Area Network (LAN)/Intranet

At the present time, none of our computers are linked together by an internal network (LAN/Intranet).

Intranet is similar in many ways to the internet but restricted to users within a single company. Just as people use the

internet to publish and share information, companies use internal networks to share information between their employees.

As we are a company that is growing and the demand of our products is constantly on the rise, all users must be able

to share files and have access to relevant information across the company.

Intranets that extend outside the company are known as extranets this will be discussed later on in this report).

Formal Contracts, Informal Communication

As per the memorandum, we are linked to local customers and suppliers via formal contracts but informal

communication.

At the moment, communication between us and our customers/suppliers are not recorded/documented. As the

communication is informal, it is hard for us to dertermine our clients ordering patterns, delivery dates and terms etc.

4. E-Business and Extranet

To obtain and maintain formal communication with suppliers and customers ali ke, it is very important to adopt an e-business

model.

What is E-Business?

E-business is about using Internet-based technology to,

y Provide superior customer service

y Streamline business processes

y Increase sales

y Reduce costs

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E-business uses tools such as email, online banking solutions, websites, supply chain management(SCM) software

and web-based customer relationship management (CRM) solutions. (Government of Canada - Services for Entrepreneurs

2010)http://www.canadabusiness.ca/eng/14 5/148/4325/

Extranet

Fairfax Supermarkets want our formal supply chain system to be connected via extranet to their SCM system.

What is an Extranet?

An extranet is similar to an intranet (explained in Section 3 Current System Analysis) but it is made accessible to

selected external partners such as business partners, suppliers, key customers, etc, for exchanging data and applications and

sharing information.

Why is an Extranet Used?

Extranets offer a cheap and ef ficient way for businesses to connect with their trading partners. It also means that your

business partners and suppliers can access the information they need 24 hours a day. The ability of the extranet to automate the

trading tasks between you and your trading partners can lead to enhanced business relationships and help to integrate your

business firmly within their supply chain. Business Link Benefits of Intranet and Extranet

http://www.businesslink.gov.uk/bdotg/action/detail?itemId=107 5386483&type=RESOURCES

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5. Supply Chain Management

Supply Chain Management is the integration of keybusiness processes across the supply chain for

the purpose of adding value forcustomers and stakeholders (Lambert-2008)

What is Supply Chain Management?

Definitions

Christopher (2005, p17), defines supply chain as the network of organisations that are involved through upstream and

downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands

of the ultimate consumer.

A more common and accepted definition of Supply Chain Management is as follows,

According to the Council of Supply Chain Management Professionals (CSCMP),Supply Chain Management

encompasses the planning and management of allactivities involved in sourcing, procurement, conversion, and

logisticsmanagement. It also includes the crucial components of coordination andcollaborat ion with channel partners, which can

be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates

supply and demand management within and across companies.

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An electronic SCM system allows us to be connected with our suppliers and customers all at the same time all the

time.

Elements of Supply Chain Management

There are five basic elements of SCM. They are,

Plan

This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting

customer demand for their product or service. A big piece of SCM planning is developing a set of metrics to monitor the suppl y

chain so that it is efficient, costs less and delivers high quality and value to customers.

Source

Next, companies must choose suppliers to deliver the goods and services they need to create their product. Therefore,

supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and create metrics for

monitoring and improving the relationships. And then, SCM managers can put together processes for managing their goods and

services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and author izing

supplier payments.

Make

This is the manufacturing step. Supply chain managers schedule the activities necessary for production, testing,

packaging and preparation for delivery. This is the most metric -intensive portion of the supply chainone where companies are

able to measure quality levels, production output and worker productivity.

Deliver

This is the part that many SCM insiders refer to as logistics, where companies coordinate the receipt of orders from

customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive

payments.

Return

This can be a problematic part of the supply chain for many companies. Supply chain planners have to create a

responsive and flexible network for receiving defective and excess products back from their customers and supporting customers

who have problems with delivered products.

Thomas Waligum, What Is Supply Chain Management November 2008

http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions#scm_abc

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Managing a Supply ChainThere are three main paths in the process:

y Product Flow - includes the movement of goods from a supplier to a customer, as well as customer returns.

y Information Flow - involves transmitting orders and updating the status of delivery.

y Financial Flow - consists of credit terms, payments and payment schedules, plus consignment and title ownership.

Juggling these elements involves record-keeping, tracking and analysis by many departments. Supply chain software,

especially large, integrated packages, combines many different technologies to give a single view of supply chain data that c an beshared with others.

Categories of Supply Chain Management Applications

Supply chain management applications fall into two main categories which are,

y Planning Applications,

y Execution Applications

Planning applications determine the best way to route materials and the quantities of goods needed at specific points. When

such applications work wellm they make possible the just in time delivery of goods.

Execution applications track financial date, the physical status and flow of goods, and ordering and delivery ofmaterials.

(Russell Kay, Supply Chain Management , 2001)

(http://www.computerworld.com/s/article/6662

/Supply_Chain_Management?taxonomyId=121&pageNumber=1 )

As per the comments of the Fairfax CEO mentioned in the memorandum, for us to be able to hold on to this contract

any more than the one-year period, we will have to implement a formal information system that can link via their extranet to their

SCM system. Following in-depth research, the most recognised and respectable supply chain management systems avaiable are

the following,

SAP Supply Chain Management

Planning, Execution and Collaboration across the supply chain network

SAP SCM is part of the SAP Business Suite, which gives organizations the unique ability to perform their essential business

processes with modular software that is designed to work with other SAP and non -SAP software.

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y SAP SCM can help transform a linear, sequential supply chain into a responsive supply network in which

communities of customer-centric, demand-driven companies share knowledge, intelligently adapt to changing market

conditions, and proactively respond to shorter, less predictable life cycles. SAP SCM provides broad functionality for

enabling responsive supply networks and integrates seamlessly with both SAP and non -SAP software.

Oracle Supply Chain Management

Best-In-Class, Complete, Open, Integrated solution that powers information-

driven supply chains

Oracle supply chain management (SCM) is a best-in-class, complete, open, integrated solution that powers

information-driven supply chains. With Oracle SCM, companies can predict market requirements, innova te in response to volatile

market conditions, and align operations across global networks. Oracle SCM provides industry -specific solutions based on best-

in-class applications that span product development, demand management, sales and operations planning, transportation

management, and supply management.

The above systems are there to deal with all issues of the Supply Chain Management System and are very expensive

to implement.

What Works for Us?

Other than the two top range SCM systems discussed above, there are other alternatives available in the marketplace.

As we are not a company as large as Fairfax Supermarkets, we do not need to invest a high amount of capital for an

SCM system. We as a company fall in the middle of this supply chain which means we just need a tailormade solution that

formally records and manages communication with our suppliers and customers and at the same time, links to Fairfax

Supermarkets SCM System through extranet.

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6. Positive Impacts of Implementingan SCM System

In this section we will look at the impacts the implementation of a Supply Chain Management System has on,

Our Business

Faster response to changes in supply and demand

With increased visibility into the supply chain and adaptive supply chain networks, you can be more responsive. You can sense

and respond quickly to changes and quickly capitalize on new opportunities.

Increased customer satisfaction

By offering a common information framework that supports commu nication and collaboration,SCM enables to better adapt to and

meet customer demands.

Compliance with regulatory requirements

You can track and monitor compliance in areas such as environment, health, and safety.

Improved cash flow

Information transparency and real-time business intelligence can lead to shorter cash-to-cash cycle times. Reduced inventorylevels and increased inventory turns across the network can lower overall costs.

Higher margins

With SCM, you can lower operational expenses with more timely planning for procurement, manufacturing, and transportation.

Better order, product, and execution tracking can lead to improvements in performance and quality and lower costs. You can

also improve margins through better coordination with business partners.

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Greater synchronization with business priorities

Tight connections with trading partners keep your supply chain aligned with current business strategies and priorities, impro ving

your organization's overall performance and achievement of goals.

Transportation management

Consolidate orders and optimize shipments with the SAP Transportation Management application. By sharing information and

combine orders directly with carriers over the Internet, you can i ntegrate business partners into your company's processes andmaintain control of plans.

Warehouse management

Optimize warehouse activities, including inbound and outbound processing, facility management and storage, physical inventory,

and planned and opportunistic cross docking. Take advantage of data collection technologies such as radio frequency

identification (RFID) and voice and new workload balancing tools.

Minimized Delays

Many supply chains particularly those that havent been enhanced with a supply chain application are plagued by delays that

can result in poor relationships and lost business. Late shipments from vendors, slow downs on production lines, and logistic al

errors in distribution channels are all common issues that can negatively impact a companys ability to satisfy customer demand

for its products.

With supply chain software, all activities can be seamlessly coordinated and executed from start to finish, ensuring

much higher levels of on-time delivery across the board.

Enhanced Collaboration

Imagine having the ability to know exactly what your suppliers and distributors are doing at all times and vice versa.

Supply chain softwares make that possible, bridging the gap between disparate business softwares at remote locations

to dramatically improve collaboration among supply chain partners. With supply chain softwares, all participants can dynamica lly

share vital information such as demand trend reports, forecasts, inventory levels, order statuses, and transportation plans in

real-time. This type of instantaneous, unhindered communication and data -sharing will help keep all key stakeholders informed,

so supply chain processes can run as flawlessly as possible.

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Reduced Costs

A supply chain software can help reduce overhead expenses in a variety of ways. For example, it can:

Improve inventory management, facilitating the successful implementation of just -in-time stock models, and eliminating

the strain on real estate and financial resources caused by the need to store excess components and finished goods

Enable more effective demand planning, so production output levels can be set to most effectively address cu stomer

requirements without the shortages that result in lost sales, or the waste that drains budgets

Improve relationships with vendors and distributors, so purchasing and logistics professionals can identify cost -cutting

opportunities such as volume discounts.

Activities of Supply Chain

Supply chain management is a cross-function approach including managing the movement of raw materials into an o r-

ganization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of

the organization and toward the end -consumer.

Several models have been proposed for understanding the activities required to manage material movements across

organizational and functional boundaries.

Strategic

y Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facil i-

ties.

y Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical inform a-

tion and operational improvements such as cross docking, direct shipping, and third -party logistics.

y Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and

capacity management activities.

y Information technology infrastructure to support supply chain operations.

y Where-to-make and what-to-make-or-buy decisions.

y Aligning overall organizational strategy with supply strategy.

Tactical

y Sourcing contracts and other purchasing decisions.

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y Production decisions, including contracting, scheduling, and planning process definition.

y Inventory decisions, including quantity, location, and quality of inventory.

y Transportation strategy, including frequency, routes, and contracting.

y Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.

y Milestone payments.

y Focus on customer demand.

Operational

y Daily production and distribution planning, including all nodes in the supply chain.

y Production scheduling for each manufacturing facility in the supply chain (minute by minute).

y Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all

suppliers.

y Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.

y Inbound operations, including transportation from suppliers and receiving inventory.

y Production operations, including the consumption of materials and flow of finished goods.

y Outbound operations, including all fulfillment activities, warehousing and transportation to customers.

y Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, di s-

tribution centers, and other customers.

Organizations increasingly find that they must rely on effective supply chains, or networks, to successfully compete in the global

market and networked economy.

Our Suppliers

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Demand Forecasting

Demand forecasting based on orders received instead of end user demand data will inherently become more and more

inaccurate as it moves up the supply chain. Companies that are removed from contact with the end user can lose touch with a c-

tual market demand if they view their role as simply filling the orders placed with them by their immediate customers.

Order Batching

Order batching occurs because companies place orders periodically for amounts of product that will minimize their o r-

der processing and transportation costs. Because of order batching, these orders vary from the level of actual demand and this

variance is magnified as it moves up the supply chain. And it helps the suppliers to sell their stock easily and within the g iven time.

In fact this is useful for both suppliers and us because we can buy stock in bulks and can save a bit of money on things.

Data Storage and Retrieval

The functional area of an information system is composed of technology that stores and retrieves data. This activity is

performed by database technology. A database is an organized grouping of data that is stored in an electronic format.

This database can be very useful for our suppliers, as they would know that what a business is doing at the moment

and what are they are going to do with us in future.

Open information sharing, which means an honest relationship with suppliers.

Effective communication with suppliers

All correspondence is documented.

Allows the supplier to prepare for the busy trading periods in the year and deliver enough stock.

More effective complaint process

Easy Return Management - Shorter turnaround time for requests

Our Customers

Improved feedback procedures which means improve relations with customers.

Our product is always within the customers r each as it decreases the amount of stock outs at their local supermarket/store.

Happy customers means increased revenue, better trust of the customers and a better reputation.

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Timely order fulfillment - e.g., fewer empty shelves as we are aware of the sale s of our product in each of Fairfaxs 200 outlets

nationwide.

CRM in Supply ChainCustomer relationship management (CRM) covers methods and technologies used by companies to manage their relationshipswith clients. In this software Information stored on existing customers (and potential customers) is analyzed and used. Basicallycorporate level strategy, focusing on creating and maintaining relationships with customers CRM should identify factors impor tantto a client promote a customer oriented philosophy, adopt customer based measures, develop end to end processes to servecustomers, provide successful customer support , handle customer complaints ,track all aspects of sales etc.

Benefits of implement:Major benefit can be the development of better relations with existing customers, which can lead to increased sales through bettertiming due to anticipating needs based on historic trends, identifying needs more effectively by understanding specific custo merrequirements, identifying which of the customers are profitable and which are not. This can lead to better marketing products orservices by focusing on effective targeted marketing communications aimed specifically at customer needs a more personal a p-proach and the development of new or improved products and services in order to win more business in the future ultimately thiscould lead to enhanced customer satisfaction and retention, ensuring good reputation in the marketplace continues to grow in-creased value from existing customers and reduced cost associated with supporting and servicing them, increasing your overallefficiency and reducing total cost of sales improved profitability by focusing on the most profitable customers and dealing with theunprofitable in more cost effective ways

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7. Negative Impacts and Risks

Distribution Network Configuration

Number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross -docks and cus-tomers.

Distribution Strategy

Questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping,

cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation .

Trade-Offs in Logistical Activities

The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade -offs may increase the totalcost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pa llet

basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs,

there will be an increase in inventory holding costs which may increase total logistics costs.

Information

Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory,transportation, potential collaboration, etc.

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Inventory Management

Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods.

Cash-Flow

Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information and funds across

the supply chain. The flow is bi-directional.

Negative impacts of implementing a supply chain management

Implementing a new system on business on has its negative impacts

High cost: implementing a new system can be very costly for small business like Janets Pots. Speciall if the cost is not car efullymanaged, great amount of money is invested in getting the new system in place. Which needs monitoring and control and if allthese are not carefully managed the project deviates from the plant, hence leading to high cost and waste of time.

Performance of staff members not well evaluated: performance evaluation should re enforce and support sales training. Desig n-ing appropriate performance evaluation is critically important to bring about sales expertise, activities and outcome. Becauseperformance evaluation can have a dramatic impacts on sales force behaviours it is imperative that traditional performance

evaluation be designed to motivate and encourage appropriate supply chain behaviours and activities. Inappropriate performanceevaluation may in fact motivate behaviour that is countered productive to supply chain performance.

Training of staff members: it can be a long proc ess and idle time would increase, staff members need first hand materials withtheir companies internal logistic processes, system and capabilities. A full understanding of the operational processes enhan cesinter-functional co-ordination and the staff level of logistic expertise. From a tactical prospective, this expertise help staff managelogistic processes and system to meet the needs of the supply chain partners. From strategic prospective, staff will understa nd thelogistic capabilities needed to meet the strategic goals of various supply chain partners and overall supply chain.

Internal resistance to change: there is always a negative reaction to change in every business, people do not like change andsome staff members might have problems coming to terms with a new system. Staff members might think the new system intr o-duced might reduce their hours or lose their jobs hence they would not like it.Many mistakes at first: almost every business makes mistakes when implementing a new system, the first b it of information ob-tained may be inaccurate. This in turn can result in key analyst may lose trust a new system, this might also lead to losing trustfrom our customers and suppliers. The business might be holding the wrong information on customers and su ppliers due to themistakes made. They might fail to meet customers needs in time, it is said that satisfied consumers will be loyal customers who

will continue to purchase the supply chain goods and services. As well as influence others to purchase those same goods andservices.Gaining trust from the suppliers and partners: because a new system is being introduced, the business may have to change theway they operate meaning the suppliers ill need to change the way they work. So far only the largest and most powerful manufac-turers have been able to force radical changes such as this

The suppliers would be sharing a lot of information, something they may not want to do. We have been willing to co m-promise and help them achieve their goals.

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8. Solutions to Avoid Negative

Impacts

There are always negative impacts whenever a new system is implemented into a business and those impacts play the

main role in the success or failure of a business.

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There is always a solution to a problem and here we have some possible solutions towards the negative impacts

discussed earlier

Cost is always the main concern when we are implementing a new system into our business. We have to invest a large

amount of money into the business to get a new system. We can mitigate this cost by having a few plans. These plans can be

Implementing a cheaper system whichever available in the market for the time being as for the first year because we

are not very sure about the future contractors and contracts. After the first year, if we get more contracts than expected than we

can always switch towards the more expensive options like SAP and ORACLE. It will save money and if we dont have that many

contracts or the contracts go down from expectation than we can carry on with c urrent system and we dont need to buy and

implement the expensive system.

We can implement an expensive system but then we should expand its cost over a long period of time, that period can

be 3, 5, 7 or 10 years. We can recover this cost over the desired period of time accordingly. And it can be done by re-submitting a

price grid to Fairfax on renewal of the current contract so we can recover the cost of the investment in the mean time. But a gain,

the future is not certain and we are not sure about our fu ture contracts and contractors and if we buy an expensive system and we

are not able to recover its cost in future than this would be a huge loss.

We should inform our suppliers about our new demands at least 3 to 6 months prior to the activation of the new

system. This is good for both suppliers and us as we can express our concerns towards new things and same would be with

suppliers as they can talk to us about their concerns and thus the problems can be expressed and negotiated before the new

system is even activated and we can avoid a lot of convenience.

Notifying the employees about the change is always a good idea. We can tell our current employees about the

forthcoming changes into the current system and the changes into the IT systems. This will al low the employees to think and talk

about their concerns about the new system with each other and with the senior staff. And as a result they would be less

threatened about the new system. Employees will make themselves ready for the new things and they wo uld be excited rather

than be threatened.

A possible way to cut the idle time is to hire some temporary skilled workers. They will work and cover the idle time caused due to

the training of current staff. As the present staff is learning new things the tem porary staff will work through the procedure for the

time being.

Employing some skilled workers for long term is an option but definitely a costly one as it will cost a lot to the business.

We have to look through our profit margins and sales ratio before considering this option as the wages bill will increase. Skilled

workers will work thoroughly in a new system but that can be resulted into some current employees losing their jobs and this will

cause some uncertainty into other employees.

Motivation is always one of the best options to get your desired outcome. So, by motivating the employees, we can get

our desired outcomes and the employees will be happy with us too.

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The staff should be given with flexible and reasonable time for training. Hustle makes things worse not better. A flexible

approach is good as people take their own time to learn things and they would learn it at their own pace. It is always diffic ult to

adopt new things but everyone will get used to it as the time will go by.

Announcement of a formal reward system can be a good idea. A small reward given to a hard working employee does

not affect an employers financial position but give business a boost. Rewards on given targets motivate employees and then t he

employer also knows about the hard working employees. An intelligent employer knows how to get maximum output from their

employees.

We should organize some seminars and meetings with our suppliers and our customers to educate them about our

new system and these will help our own employees too as they will also take part in these seminars.

We should agree and sign Memorandum of Understanding and Confidentiality Agreements with our current and future

suppliers. This would put a confidence in the business and it would be a fair trade for s uppliers and us. We would know that our

information is not leaked and the suppliers are loyal to us.

The last possible solution is Outsourcing. This is the most costly option and should be our last choice. We can carry on

like we are at the moment and hire a whole company who did everything considering supply chain management for us. Then we

dont have to change anything regarding the current system and we will do what we are doing at the moment except there are

some new people who will look through all the things and will put everything into the system. But outsourcing is one of the most

expensive things and we already have shown concerns about the costs and moreover it proves the weakness of the business as it

proves that the people who are working for the business are not capable of adopting and implementing changes and new things

which is a shame for any business in this world as this is an IT age and everything is technology in every sense.

Risk management in supply chain

Risk management can be defined as the culture, processes, and structures that are directed towards the effective management o f

potential opportunities and adverse effects. Risk assessment involves estimating the level of risk estimating the probability of an

event occurring and the magnitude of effects if the event does occur. Essentially risk assessment lies at the heart of risk

management, because it assists in providing the information required to respond to a potential risk.

In different level of risk management include in successful SCM for example:1. Natural hazards (flooding, landslides),2. Financial risk management

3. Investment related risk management4. Business related risk management.

Natural hazards:Before investing in a new project it is very important to know about the natural hazards of around the project site. After assessingthe risk its good to start the project if the risk is minor.

Financial risk management:Financial risk management is the practice of creating economic value in a firm by using financial instruments to manage expos ureto risk, particularly credit risk and market risk. Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflationrisks, etc. Similar to general risk management, financial risk management requires identifying its sources, measuring it, and plansto address them.

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Investment related:Depending on the nature of the investment, the type of 'investment' risk will vary. High -risk investments have greater potentialrewards, but also have greater potential consequences. A common concern with any investment is that the initial amount investedmay be lost (also known as "the capital"). This risk is therefore often referred to as capital risk. For example, in Janets Pots beforeinvesting huge money in SCM software to fulfill the requirements of Fairfax as the len gth of the contract length is up to one year. Itmay be extended in future but still its not guaranteed.

Business Related:The risk that a company or project will not have adequate cash flow to meet financial obligations; thus causing the business to filefor bankruptcy. Before any transaction can be undertaken, each party must be able to supply something the other party demands .To overcome this mutual coincidence problem, some communities had developed a system of intermediaries who can warehouseand trade goods. However, intermediaries often suffered from financial risk. Whilst higher risk normally implies higher overallrewards, this is not always the case. For example a high -risk mortgage client may be required to pay a higher interest rate on their

mortgage repayments in order to be accepted as a bank's customer.

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9. Conclusion

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