In this guest post, Procurement Leaders invites Charles Morrison from supply chain management solution provider NQC to look at tactics being used to tackle supplier fraud and with precise data.
Eliminating fraud from our supply chains is imperative but it's easier said than done. Modern supply chains have become increasingly intricate and larger supply chains inevitably have a greater exposure to risk – the food supply chain is a prime example.
By and large the industry welcomed the final report of the Elliot Review into the Integrity and Assurance of Food Supply Networks. Commissioned following the horsemeat scandal in Europe, the report focuses primarily on food fraud and calls for the creation of a dedicated food crime unit with a zero tolerance approach to anything deemed to be criminal activity.
Still there are issues for procurement teams to consider here. Supplier networks are more international and more complex by nature than ever before. Add to this the modern consumer's desire to understand the provenance of everything that ends up on the table and it's easy to see why procurement departments in the food industry feel under such intense scrutiny.
One of the key issues raised by the Elliot Review was the lack of visibility or transparency along the supply chain. In his response to the review Andrew Opie, director of food and sustainability at the British Retail Consortium, acknowledged that we need better education about where food comes from but that this requires "co-ordination along the supply chain."
Unfortunately, the more links there are to the chain, the more difficult co-ordination becomes. Fast food chain McDonald's is lauded in some quarters for a supply chain built on trust and transparency, but its chain is relatively small compared to other retailers.
Disruption usually occurs beyond Tier 1 and 2 suppliers, where visibility is more limited. As most orders are placed at Tier 1 level, there is rarely any insight into the network of subcontractors and suppliers below that point. This is a problem for procurement experts. Less ethical or more financially volatile processes typically take place at points in the supply chain where few buyers can exert any control.
This means that the rigorous auditing campaign that the Elliot report advocates is of limited benefit as such regimes rarely penetrate deep into the supply chain. Decades of similar audits in the apparel supply chain have failed to eliminate malpractice there and there is no obvious reason to expect the food industry to be any different.
However, the review also stressed the need to gather a greater depth of information and one of the report's key recommendations was to explore effective mechanisms for intelligence gathering and information sharing. Some leading organisations are ahead of the game here, using supplier engagement platforms that enables them to improve and future-proof their supply chains.
The platform collects information in a proportionate way directly from suppliers and enriches this data with external information to give organisations a single view of critical supplier data including compliance metrics, key performance indicators (KPIs), risk indicators and other key organisational information such as financial and operational performance. Supplier performance can be scored and benchmarked, enabling organisations to work only with those suppliers that meet the required standards. Crucially, these strict criteria are also a deterrent to rogue elements trying to enter the supply chain.
For procurement professionals this not only brings peace of mind from a compliance perspective but it also enables them to save time and money, monitor supplier behaviour, understand sustainability information and reduce potential risks and disruptions across their supply chains.