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Sleepwalking into another supply chain crisis

25 July 2014

UK businesses could be sleepwalking into another supply chain crisis.

It has only been 18 months since the horse meat scandal began in 2013, but consumers and businesses have reverted to a ‘don’t ask, don’t tell’ policy on supply chains according to research by the Chartered Institute of Purchasing and Supply (CIPS).

CIPS’ research has found that business leaders do not understand their own supply chains. Almost three quarters (72%) of British supply chain professionals say they have zero visibility of their supply chains beyond the second tier with only 11% saying they have visibility along the entire chain.

As a result, only 21% of supply chain professionals say that they are able to guarantee there is no malpractice in their supply chains with the majority (51%) saying the horse meat scandal has not led to supply chain risk being taken more seriously.

The research, which was carried out across consumers, senior business decision makers and supply chain professionals hints at a worrying disconnect between supply chain professionals and senior decision makers within businesses, the latter of whom are around half as likely to say their company’s supply chains are opaque (13% compared to 27% amongst supply chain professionals).

Speaking to Governance + Compliance (G+C), chief knowledge officer of Optimum Procurement Group Gerard Chick said, ‘businesses have to go beyond the basics in any examination of their supply chains now. The fact is forward-thinking brands are already acting responsibly and their commercial success bears testament to this.’

He added that ‘businesses must be aware of the perils of failing to systematically review and revise their modus operandi. Reputational damage can be mitigated by stakeholder buy-in – moreover auditing and effective contract management will provide an organisation with demonstrable evidence required if a costly and damaging scandal is to be avoided.’

Hugh Williams, managing director of supply chain consultancy Hughenden Consulting, told G+C that prominence at board level is needed; ‘supply chains tell some uncomfortable truths that businesses can either choose to listen, learn and profit from or be wilfully blind to and risk major financial and reputational damage. Until supply chain is given prominence at board level, companies will keep sleepwalking into new crises like the horse-meat scandal.’

However, speaking to G+C, Nick Miller,head of fast-moving consumer goods at Crimson & Co said that ‘taking a greater responsibility over the source of food, whether it be from a third party supplier or that of one brought directly’ was needed.

‘It will require the retailers visiting first-hand the sites they procure their food from and not relying on second hand feedback from local distributors and suppliers’, added Miller.

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ICSA: The Governance Institute
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