How to de-risk your supply chain

Procurement professionals need to take responsibility for their supply chain and implement a strategy that drives change, according to industry leaders. 

A panel discussion at the CIPS Business Briefing on Strategic Sourcing, held at the Park Plaza in London, explored how to manage global supply chains and what to be aware of regarding risk mitigation and the importance of maintaining strong supplier relationships at a global and local level.

1. Know your suppliers

Alex Jennings, CPO at international packaging company DS Smith, said it is vital that you know your major direct suppliers before using sustainability tools. DS Smith uses a tool from EcoVadis. “If you’ve got £100m spend with someone then you need to know what they are doing and have a close enough relationship that you control that,” he added.

Segmenting suppliers by region and category is recommended to identify high-risk areas. However, Jennings warned not to “drop the ball at home” regarding social and environmental risks. Issues such as modern slavery are prevalent worldwide and the same attention needs to be given to local supply chains as global.

While a tool like Ecovadis is useful, Rob Alexander, CPO for EMEA at commercial real estate services firm JLL, said companies shouldn’t rely solely on outsourced tools. “You need to understand how they operate the business”, and ensure basic practices are followed such as suppliers signing up to a code of conduct and contractual agreements which outline modern slavery and sustainability compliances, he said.

2. Tailor strategy on a local and global level

Understand how to drive strategy, create value, and control your supply chain to ensure it’s safety-compliant and meets company, trade union, and international labour standards.

Alexander said: "We drive towards creating a global strategy at a category level, but the strategy then dictates how it is implemented." For example, political instability could affect whether to implement a supply chain at a regional or local level. It is also recommended to configure the strategy in conjunction with how the market is set up. This often means it will vary by sector. For example, cleaning companies are rarely global and JLL focuses on developing supply chains at a national level, he said.

Aysegul Sabanci, group head of procurement and supply chain at engineering firm ISG, recommended early engagement when localising supply chains, in the UK and overseas, and training to ensure quality. This can involve developing apprenticeships in order to upskill local workers and supporting local suppliers regarding carbon emissions and risk management. In times of Brexit, an effective localisation programme may be vital to meeting needs that have become harder to deliver through global supply chains.

3. Act immediately

It is vital to act on incidents of violations of social and environmental standards to progress towards a culture of change, said Jennings. You need to manage supplier relationships closely regarding mitigation of risks and take responsibility for actions in the supply chain.

“If we continue to allow suppliers to get away with stuff, to push it under the carpet because they’re cheap or we like their product or service then we are all guilty, and I suggest you either change the culture of the company you work for or change the company. We own this problem,” said Jennings.

4. Identify and adapt

Assess the category supply chain and understand the needs of customers and consumers in order to set up effective supply chains. It is essential to have a plan when developing supply chains in countries of high risk, Jennings said. “You need to work with those suppliers to make sure you have policies, procedures, behaviours, audited activity and a partner that you work with that can help protect your supply chain,” he added.  

Identify the culture of the country and challenges that this brings in order to adapt and support suppliers. Strong relationships enable you to work with vendors to tackle issues that go into CSR assessments.

Alexander highlighted that language barriers with global suppliers can also cause problems with communication of expectations. It is recommended to use translators and check the quality of products.

The next CIPS Business Briefing takes place in Manchester on 18 June.

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