CIPS News


Your views - has management of risk increased since the horsemeat scandal?

CIPS 22 February 2013

The debate rumbles on, but has anything changed?

Today’s confirmation that horsemeat has again been found to have been fraudulently marketed and sold to the British public is another devastating example of poor supply management. Indeed poor supply management has enabled fraud in the supply chain to flourish and one can assume that the situation with horsemeat is just the tip of the iceberg.

Everyone from investors to the procurement team has to accept responsibility for this affair, caused above all by a lack of scrutiny and a laissez faire attitude to supply chain management.

We will continue to witness scandals such as this, in a multitude of sectors, until investors, analysts and boardrooms place appropriate emphasis on the importance of their supply chain to their business and take steps to ensure they are fit for purpose. How many company chairmen can truly say they understand their business’ supply-chain and all its inherent risks? How many analysts interrogate a CEO on supply-chain risk to the same extent they do on marketing strategy? As the financial crisis showed, too little attention is often given to the areas of a business that have the impact to create the most damage.

Fiascos such as we are currently observing occur when businesses fail to impose and exact the same levels of scrutiny at every stage of the supply chain, on all its suppliers. This is more critical now than it has ever been as businesses increasingly outsource functions to reduce costs. Some businesses believe they are impervious because they have scrutinised their first and second tier suppliers, leaving responsibility for the third and fourth tiers to suppliers themselves. Consequently this leads to fraud, the scale of which is currently unknown. But companies must remember that the one thing they can’t outsource is the responsibility they have through their brand to provide customers with a genuine and safe product. 

Whilst some have blamed this latest issue on a change in regulations, for companies to do so is sheer negligence. Regulations are there to impose minimum safety standards. Companies need to go above and beyond to ensure their supply chains are free from fraud; when they don’t, this is the end result.

People are particularly worried in this instance because it involves food, but the importance of supply chain scrutiny cuts across all sectors. It is only a matter of time before the next crisis emerges. Automotive companies continue to grapple with parallel concerns on consumer safety as a result of supply chain faults. The treatment of workers is a perennial issue for fashion brands and Intellectual Property theft is a huge issue for manufacturers and their global suppliers. Companies need to do more to guard themselves against these risks.   

We hope this sorry tale will at the very least ensure supply chain is recognised as one of the most important aspects of a business and adequately scrutinised at every level. Those investors and businesses that do acknowledge this and master their supply chain will succeed; those that don’t will eventually get found out. 

David Noble, CIPS CEO

Take our short survey on risk in the supply chain and whether anything has really changed since the scandal broke: http://www.surveymonkey.com/s/CIPS-Supply-Management-risk-research

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