Scandal triggers chain reaction

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.

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.