Sourcing and supply chains

Written by By Bridget Day, Intertek • Online since 1.09.2016 • Filed under Industry news • From Issue 4 - September 2016 - February 2017 page(s) 71-72
Sourcing and supply chains

Managing supply chain risk and performance on a global level.

The demand for compliance and traceability across all points in the supply chain is increasing. Consumers are better educated and informed by media and non-governmental organisations (NGOs). Traditional concerns relating to physical product quality are supplemented by an interest in social, environmental, security, and sustainability issues. As a result, noncompliance within supply chains represents a huge reputational risk and a concern for brand integrity. Consumers, governments, and communities are all under pressure to address supply chain management, the quality and safety of their products, and even how the production of their consumer goods impact the lives of workers, their communities, and the environment. Retailers and brand owners are required to demonstrate good corporate governance across their supply chains, and their suppliers must also be able to prove their capabilities, capacity and performance in these areas.

Import and export challenges

We live in a globalised world, which becomes smaller every day. International trade is a complicated affair, with multifaceted supply chains that increase the potential possibility of blind spots for buyers, which in turn results in significant levels of risk. With today’s regulatory conditions and consumer expectations, international retailers, brand owners and buyers need to understand and control the quality of products being imported. Transparent information is essential for managing risk and ensuring compliance with safety, security, social and environmental standards. As importing countries step up consumer-protection measures, it is critical to ensure the high quality of all products entering the market. Furthermore, retailers, brand owners and consumers need to evaluate supplier manufacturing performance to make informed decisions that will support their business processes and meet customer and industry expectations. To achieve this, they require improved transparency and more reliable data when it comes to their supply chains and product sourcing.

Mitigating risk

At the core of sourcing and supply chain management is the principle of mitigating risk. Both buyers and suppliers have to clear major supply-chain hurdles as a prerequisite to bring goods successfully to market. To play in the global marketplace, companies must consider risk management and compliance to minimise their exposure. The main areas of risk include:

Visibility/transparency

Without real transparency in all supply chains, uncontrolled risks can result in claims, product recalls, loss of goodwill and brand reputation. Consumers are more demanding of transparency on issues such as the clear provenance of their goods, sustainability and environmental impact and ethical practices. Factors such as human rights and conflict-free provenance play a far greater role in the sourcing of products than ever before and must be considered when managing supply chains.

Traceability

As global supply chains become increasingly complex, it is more difficult for companies to keep track of their supplier partners. Companies rely on subcontractors and wholesalers to act as intermediaries and domestic importers, and effective oversight and management is challenging. With increasing consumer demands to know what happens in the sourcing and supply chain, the focus is not only on the origins of products, but on tracing the journey of raw materials from beginning to end within the supply chain, with high emphasis on the chain of custody.

Sustainability

In today’s global marketplace, manufacturers and consumers are more concerned than ever about the impact of products on the environment. Globally, companies are working to improve environmental practices across their supply chains while improving their bottom line. Reducing costs, improving materials and committing to green manufacturing best practices ensures a safer environment that benefits business and consumers, and better positions brands.

Supplier performance

Supplier management is an issue requiring a holistic approach, which addresses the collection and validation of general supplier information, including data such as conflict minerals, sustainability, security, social workplace conditions and other reporting due diligence requirements. Verification and audit services are needed to validate supplier practices based on business compliance, social, environmental, quality and security issues, as well as industry standards and second-party customer-specific programmes or requirements.

Complexity

Supply chain complexity refers to the inter-dependent and inter-connected nature of the elements within a supply chain where a change on one element can have an unforeseen impact on other parts of the supply chain. The more suppliers and sub-contractors used with a business, the more complex this web of elements becomes. Diversity of products and services can result in an increase in processes, which in turn may require the implementation of multiple management systems. Integrating these in a practical way that is both time and cost-effective is challenging.

Costs

Cost is a factor that affects the bottom line and businesses can implement cost-reduction strategies that will improve their margins. These strategies can address factors such as reviewing transportation and storage components, optimising supply chain networks, and streamlining of processes to increase efficiencies.

Natural disasters (extreme weather, earthquakes, floods)

Natural disasters are an area of risk that falls beyond the control of a business. Although these cannot be controlled, or even predicted, they can be mitigated by having strategies in place before they happen. Failure to plan for these eventualities can leave a company open to risk and loss. Therefore, having a crisis control plan with a designated chain of command is vital. Supplier diversity, comprehensive insurance and building redundancies in your operation are just some of the ways to mitigate the effects of natural disasters.

Technology

In this fast-paced world it is imperative for companies to stay ahead of the technology curve to remain competitive and satisfy their consumer expectations. Implementing the latest technology allows companies to manage their supply chain effectively by identifying issues and addressing risks timeously. Sophisticated monitoring systems can manage supplier information, streamline the purchasing process, track custody, and coordinate key  players for increased efficiency.

Cyber risks

The more reliant we become on technology, the more opportunity there is for exposure through digital channels. Data breaches and intrusions can put a company at massive risk, and systems need to incorporate protection for all parties in the supply chain, including vendors, partners and even customers.

CSR/ethical sourcing issues

Corporate Social Responsibility (CSR) or the triplebottom line, covers people, planet and profit. Within the context of the supply chain, this relates to human rights and ethical practices. Companies are demanding more effective ways to evaluate their suppliers’ workplace conditions to ensure they are in accordance with accepted best practices and industry standards, and to satisfy consumers’ demands for products that have been made under decent working conditions, without harm to the environment.

Issue 4 - September 2016 - February 2017

Issue 4 - September 2016 - February 2017

This article was featured on page 71-72 of SABI Magazine Issue 4 - September 2016 - February 2017 .

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