Two thirds of buyers not managing supply chain risk effectively

3 September 2015

Almost two thirds of buyers think their organisations are not managing their supply chain risk effectively.

Responding to a mini-poll held during a webinar organised by Supply Management in association with business information publisher Bureau van Dijk, 63 per cent of listeners said they didn’t believe their organisations managed threats in the best way.

Ted Datta, BvD’s strategic account director – London, said a majority of negative response underlined the increasing awareness among companies and buyers of the key importance of good supplier risk management. This was increasingly important because legislation was covering new and wider areas, said Datta.

“Know your suppliers, business partners and third parties,” he said, emphasising buyers needed to be up-to-date with new risks as situations changed every month. Datta said as there was so much information to monitor, companies could segment their supply base to identify key strategic suppliers and monitor those suppliers ‘in real time’ or as frequently as possible depending on their resources. Others could be reviewed in a more structured way, he said.

David Lyon, head of procurement at Cancer Research UK, told the webinar, Enhanced supplier due diligence: the implications for supplier risk management, reputation was vital for a charity and it had to ensure suppliers were aligned with its core purpose. “As an organisation that spends 80 per cent of every pound donated on our core mission of research, we must work hand in hand with all our suppliers,” he said.

Checks had to be carried out regarding any possible links to the tobacco industry and the charity had alternative suppliers, and contingency and legal plans in place in case of possible risks. Lyon said Cancer Research UK’s procurement team had to build long-term partnerships based on a common purpose with all its suppliers.

Alexandra Underwood, partner at law firm Fieldfisher, told the webinar new legislation including the Bribery Act of 2011 and 2015’s Modern Slavery Act meant the “devil is in the detail”. “Procurement must know what the rules are, help to identify any breaches and have clear reporting lines if there is a problem,” she said. Penalties could include massive fines, imprisonment and "catastrophic" consequences for your brand’s reputation, she said. “Report it, don’t hide it, if you continue you could make things worse. Approach legal counsel as soon as possible so you will benefit from legal privilege,” she said.

While Underwood said firms should self-report if they thought they had broken any laws, she stressed it was imperative they get legal advice first. Questioned on the laws governing corporate hospitality she suggested companies should apply the ‘newspaper test’, which was basically to ask "how would this look on the front page of a newspaper?".

Click here to access a replay of the webinar

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