Scandal triggers chain reaction

Horsemeat in the food chain is the latest incident to highlight the vulnerability of extended supply chains, as Nick Allen reports

The horsemeat scandal is a stark reminder of the critical necessity for brands to ensure the integrity of their supply chains, an increasingly difficult task considering the complex international nature of modern supply networks.

To combat threats to reputation and brand value, companies operating complex supply chains will have to become far more vigilant concerning supplier compliance and will find it necessary to build closer collaborative relationships with suppliers in order to fully understand lower tiers in the chain.

In the wake of the horsemeat debacle, Tesco’s chief executive Philip Clarke recently emphasised: “We are looking in great detail at every aspect of how products are sold in Tesco and at how our relationships with our suppliers become more transparent and collaborative.”

It appears evident that many food companies lack visibility in their supply chains on certain products beyond tier-one suppliers and this may be true across a broad spectrum of industries. This lack of visibility down through the tiers introduces risk into the supply chain.

Food labelling is just one of many varied and potentially highly damaging risks open to supply chains. Risk to reputation can also arise from non-compliant suppliers using child labour or through the poor treatment of workers.

One of the greatest challenges facing modern supply chains will be finding people with the right skills to run them

But most dramatically, 2011 saw the impact of natural disasters on automotive and electronics lines of supply, halting fabrication of cars and smart devices at manufacturing sites across the globe.

Furthermore, last year saw fiscal imbalances, civil unrest and extreme volatility in energy and agricultural prices take their toll on international trade.

According to Accenture, more than 90 per cent of those surveyed by the World Economic Forum indicate that supply chain and transport risk management has become a greater priority in their organisation over the last five years. Interestingly, the same report suggests that illicit trade is now thought to represent between 7 and 10 per cent of the global economy.

Supply chains are under increasing pressure to perform. Chronic and widespread economic hardship, combined with a rising tide of risk associated with extended supply chains, has made managing international lines of supply a highly complex business. And this is particularly true for retail supply chains.

Craig Sears-Black, UK managing director of Manhattan Associates, says: “The growth opportunity from selling products overseas and the ability to drive down supply-chain cost through a more flexible sourcing strategy are both very real for enlightened retailers. Embracing new supply-chain technology will enable them to mitigate the risks, maximise the margin enhancement opportunity and respond quickly to market changes.”

Similarly, Lee Gill, vice president, retail strategy at JDA, says: “Real-time end-to-end visibility, from source to fulfilment centre, is a pre-requisite and collaboration with all stakeholders which is now vital, driven by a need to respond to an always ‘on’ consumer.”

The changing nature of supply chains, with a growing emphasis on creating closer collaborative arrangements with suppliers and partners, calls for a new breed of supply chain managers – intelligent, well-educated individuals with personable skills, capable of forging collaborative relationships.

To encourage graduate talent to the sector, a large number of manufacturers and logistics organisations have recently signed up as sponsors of the Novus Trust, an initiative aimed at introducing a four-year logistics and supply-chain BSc degree course with a guaranteed job from one of the course sponsors.

Andy Kaye, chairman of the trust’s steering committee, says: “In creating a degree by the industry for the industry, Novus founder members will be able to tailor the course content and selection criteria of graduates into their own business recruitment strategies.” The first students start their degree in September 2013 at Huddersfield University.