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Evolving consumer demands, along with the diversity of global sourcing enabled by modern logistics, mean that supply chains are becoming increasingly sophisticated. This sophistication also means complexity, making effective management and collaboration essential to the long-term success of retailers and manufacturers. However, a recent industry-wide survey on current supply chain management (SCM) practices, conducted by SGS, confirms that although organisations do have systems and processes in place to manage their supply chain network, they are not always perceived to be very effective.
Resilience to harm
The supply chain is a fragile thing and its global reach, while creating more diversity, also exposes it to increased risk. This risk is particularly damaging to food manufacturers and retailers, due to the thin margins food products generate. Disruptions to key crops & ingredients or poor food supply chain management can quickly damage profits and put the food producer’s long term success at risk. You have only to look at recent shortages such as olive oil and chocolate to see how quickly a shortage of high demand products can impact on the market and retailers’ bottom lines. This is without factoring in the even harder to measure damage to consumer trust that such problems cause. From a retailer’s perspective this means lasting damage to brand reputation, but from a manufacturer’s perspective this means at best greater scrutiny of their suppliers the next time they sign a contract with a retailer, and at worst can mean they go out of business entirely. Quite simply, it’s clear that resilience in the supply chain is now more important than ever.
Indeed, disruption to primary ingredients isn’t even the greatest danger. According to SGS’ survey, product tampering and fraud is now listed as the number one threat to supply chain resilience. Recent cases like the nuts for spices scandal and fraudulent alcohol products manufactured by European criminal gangs show that food and drink fraud is a lucrative opportunity for some. This adds to any number of issues which can disrupt the supply chain, from unintentional problems such as insufficient refrigeration by suppliers, through to manufacturers rushing to use unverified suppliers at the last minute to meet a customer deadline. As such, verifying the provenance and integrity of suppliers will be integral to retaining consumer trust.
The first step for organisations in mitigating supply chain risk is to take a holistic approach to managing the supply network. This means establishing clear supply chain risk ownership, introducing greater accountability and effective management. Having the right processes and tools can help greatly in reducing risk and provide greater visibility into the supply chain to see where further action needs to be taken. This not only means identifying and monitoring current risks, but also being able to predict future ones. ‘Horizon scanning’ for threats emerging from abroad before they hit at home and closer communication between retailers and manufacturers in different countries to manage global threats can also play an important role. By managing multiple relationships successfully, if there is a problem with one supplier retailers and manufacturers can anticipate supply chain disruption and take steps to switch between suppliers accordingly. From a quality perspective, regular checks should be conducted and the results centrally stored so that retailers and manufacturers can verify processes have been followed and quickly spot problems before they hit shelves.
While the food supply chain faces many trials ahead, having the right technology and processes in place can help meet the challenges of the future. Such systems and processes will no longer be a nice to have, but will be essential. A collaborative approach creating complete transparency will go beyond best practice in supply chain management in the years to come, instead becoming a strong competitive differentiator. Manufacturers and retailers need to look at all possible steps to minimise mistakes and meet the future challenges of the supply chain.
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