Expert Article by Denis O’Sullivan
The threat of terrorism has been a dominant topic in the field of supply chain security since 9/11. However the recent “horsemeat” scandal has raised new fears about weaknesses in the security of the food supply chain. Although the horse meat is not a serious hazard to health (some meat may have contained bute, a veterinary painkiller) it raises questions about what does enter our food chain and how easy it would be for something harmful to be introduced.
Creating a Secure Supply Chain
As companies embark on more global trade with international suppliers, supply chains become more and more complex with many tiers of supplier.
This scandal highlights the importance of the need to scrutinise potential new suppliers and the need to carry out regular security reviews.
As Paul Huck (Zolfo Coopers forensic litigation director) states in response to the “Horsemeat “ scandal “As everyday commerce moves from local to international suppliers, advanced due diligence before you start working with anyone is a must.” he suggests. “Then constant feedback and assessment of suppliers must be built into contract management. Suppliers should act as an extension of your business and be treated as such.”
However, in reality, such due diligence is not always a priority. Recent research conducted by Achilles and IFF Research into ‘Attitudes to supplier pre-qualification’ indicate that chief procurement officers (CPOs) regard a supplier’s ability to deliver in terms of quality, timeliness and cost as their most important risk to manage. Some 75 per cent put it in their top three risks.
A step in the right direction may be to become an Authorised Economic Operatori, the EU’s response to the WCO’s safe program to enhance security within the international supply chain. As part of this program suppliers have to be audited on a regular basis covering their processes and how they handle security within their own supply chain. This opens up the complete chain for scrutiny. As stated by HMRC “ An AEO is expected to manage risks involved with their business partners, make them aware of their safety and security standards and ensure they are reflected when they enter into contractual arrangements with them. If you have ad hoc, irregular or unknown business partners you will also be expected to have appropriate measures in place to address this risk.”
If you wish to check if a business partner holds an AEO certificate, you can access the EC Commission’s AEO database.
Regardless of whether a business is an AEO or not a risk and threat analysis should be carried out on a regular basis as part of a security audit to identify any areas of weakness.
Just remember that as a business you are paying your business partners for a specific level of service – don’t just assume you are receiving it, check what you are paying for on a regular basis.
When Things Go Wrong
Recent events have seriously damaged consumer confidence in processed meats and this has impacted on some large household names. Any incidents which cause disruption to your supply chain may have a negative economic effect and may severely damage your brand name. Historically, large companies have also suffered from damaged reputations on ethical grounds i.e. the use of child labour in the manufacture of clothing they sell.
Such events and ethical issues highlight the importance of transparency and security throughout the whole supply chain and not just the top tier.