Retail sector must regain trust

David Noble, Group CEO, Chartered Institute of Procurement & Supply
posted by David Noble
10 March 2015

The twin evils of malpractice and mismanagement rear their ugly heads again in retail and the food supply chain and the view from the procurement perspective is not pretty.

Peanuts and almonds have been used, bizarrely, as replacements for cumin seeds in food and cosmetic products and this latest scandal is deemed to be even more serious than the horse meat scandal.

It doesn’t take a genius to understand how potentially life-threatening such a move could be for anyone suffering from a nut allergy and why, we can now no longer trust the labelling on any processed foods we buy. Cumin is a popular spice used to enhance and flavour a range of dishes, but last year’s crops in India were hit hard by unseasonably fierce high temperatures so it’s suspected that this replacement is purely a cost-saving measure. But at what cost to human health?

This laissez-faire attitude is beyond negligence or ignorance. Consumers are hugely dependent on and trusting of the retail sector and the food supply chain and regardless of the high pressures the sector faces – whether it be speed to market, the need for consistently low prices and a wide range of choices offered to satisfy the hunger for the fresh and the new. Everyone is now suffering.

Our profession is suffering from reputational damage and a lack of trust when we’d made such inroads into promoting the good the profession can offer businesses and organisations of all kinds.

Businesses are suffering loss of revenue and potential investigation, consumers are suffering from ill health and a lack of faith in the foundations of organisations that feed and clothe us.

The Food Standards Agency is involved and is taking this possibly fraudulent activity seriously. According to the World Economic Forum corruption undermines our prosperity by imposing a cost equivalent to 5 per cent of global GDP (or $2.6 trillion) every year. It adds up to 25 per cent of the cost of procurement contracts in developing countries and can add up to 10 per cent to business costs globally. But health and fraud are not the only issues facing the retail industry. The sum of the whole range includes modern-day slavery, factory collapses, horse meat, late and withheld payments and bullying tactics such as ‘pay to stay’, faulty car parts. The list is depressingly long…

So, is regulation the answer? Our call to license the profession means self-regulation within the profession itself, and the confidence this brings to business and organisations hiring the best professionals. In retail, buyers are often specialists in their category but it is hard to determine how many are skilled and trained procurement professionals first.

So, are there other serious underlying reasons why these problems continue to make the headlines? Supermarkets have been accused of squeezing suppliers to such an extent that they are forced to cut corners and make unwise decisions to retain their margins. Other sectors such as aerospace and defence and the public sector have offered good examples of positive relationship management with their suppliers and healthy, productive supply chains, so surely it can be done?

I can’t help feeling that there is a mismatch between the priorities of the retail sector and the good procurement values we in the profession always debate. Perhaps the retail sector and the food sector particularly has skirted around this subject too long and is unconcerned because any reprimand from the groceries code adjudicator or the Food Standards Agency is unlikely to be robust enough to result in widespread change. But where there may be a shortfall from official bodies, I hope that CEOs, boards and shareholders throw themselves wholeheartedly into the debate and start questioning the real impact these poor practices will bring to the long-term future of their businesses. I hope we at the Institute can talk and support more to resolve some of these misunderstandings.

David Noble is group CEO, CIPS

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