Food industry needs new direction on supply chain risk

1 November 2013
After months of supply chain scandals in the food sector, 31 major investment funds are quite right to support Oxfam’s call on the food industry’s 10 biggest companies to improve their supply chain policies and transparency to protect people, planet and profit. But, when it comes to creating the supply chain visibility and accountability vital to retaining consumer confidence and shareholder value, is there more the food industry can do, beyond this initiative? In the US, companies are already required to reveal supply chain disruptions that could have an impact on share price; recognising the ‘duty of care’ that listed companies have to protect their shareholders’ investments. It is only a matter of time before the UK follows suit. The smartest companies should pre-empt this and act now to address the full spectrum of supply chain risk – above and beyond those highlighted by Oxfam. But we believe the vast majority of supply chain risks can be mitigated.

Four separate reports – Achilles, IBM, KPMG and Resilinc - have concluded that global businesses need more visibility and understanding of who their suppliers are and what risks they pose. For many businesses, up to 70 per cent of their spend is with subcontractors, so there is vast potential for waste if companies do not understand what the supply chain looks like or what risks lie within it.

First, businesses need to implement a common database for the management of supplier information to ensure everything is up-to-date – from fundamentals such as address and contact numbers, through to policies such as health and safety, compliance and anti-bribery. Buying companies should then issue questionnaires to suppliers. Based on their responses, companies deemed to be higher risk should be audited to check submitted information is correct. With an understanding of the main contractors, global businesses can then map the supply chain through all the tiers to find out who are the main suppliers’ suppliers, who supplies them, and so on. This proactivity helps to identify and mitigate risk right through the chain – instead of simply reacting to each disaster. The whole process of managing supply chain risk works best when entire industries – such as FMCG – collaborate and implement standardised requirements of all suppliers. This shares the administrative burden and results in standards being raised internationally. Having an agreed process in place across a whole industry means SMEs would only need to fill in their details once to be eligible to work for all global buyers. ☛ Adrian Chamberlain is chief executive of global supply chain risk management company Achilles 
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