UK businesses are still woefully unprepared for another supply chain crisis more than two years after the horsemeat scandal, according to research by the Chartered Institute of Procurement & Supply (CIPS).
The research, carried out across senior supply chain managers and procurement professionals world-wide, reveals that two thirds (66%*) of UK supply chain professionals either do not have or are unaware of a risk mitigation strategy which covers all the tiers of their supply chain. Risk mitigation strategies ensure businesses and countries maintain important supplies during an unexpected crisis (such as a conflict or natural disaster) which might impact on foreign suppliers.
Furthermore, only 11% of supply chain managers maintain a close relationship with their suppliers, which is a critical way of ensuring clear lines of sight throughout the supply chain and preventing nasty surprises. The majority (65%) either have relationships with tier one suppliers only or do not have any relationships with suppliers at all, resulting in buyers who are disengaged and which ultimately raises concerns about best practice in supply chain management.
The research also finds direct evidence that the poor relationships between UK suppliers and procurers is resulting in regular disruptions to supply chains in the UK. Two thirds (67%) of supply chain managers with strong supplier relationships up to tier three and beyond say they have avoided major supply chain crisis in the past twelve months. The proportion of supply chain managers with tier one supplier relationships only who claim the same is just 45%.
In addition, there is clear evidence that close relationships are critical in ensuring visibility through supply chains, which can help improve companies’ efficiencies and prevent potential disruptions. The majority (56%) of businesses with close supplier relationships up to tier three and beyond also have complete visibility of their supply chain, whilst businesses with relationships with tier one suppliers only, just 13%.
Businesses with supplier relationships up to tier three and beyond are also three times more likely to be certain there is no malpractice in their supply chain compared to those with relationships with tier one suppliers only (49% and 16% respectively). At the same time, they are twice as likely to take responsibility for any malpractice in their supply chain (62% and 32% respectively).
Close working relationships, as well as a close company board oversight of suppliers, can be critical to help develop trust, transparency and help monitor good behaviour throughout the supply chain.
Regular audits of suppliers can also discover any instances of foul play and according to the survey, businesses with strong supplier relationships are nearly twice as likely to conduct one or more audits a year compared to those with tier one relationship only (65% and 35% respectively).
David Noble, Group CEO of the Chartered Institute of Procurement & Supply (CIPS) said:
“Businesses can outsource the production of their goods to remote suppliers, but they cannot outsource accountability and responsibility for the conditions in which these goods are produced and where raw materials are sourced.
“As UK companies are increasingly using suppliers in emerging markets to maintain their price competitiveness, they are becoming more exposed to reputational risks such as poor health and safety standards for workers or even enforced slavery, bribery and corruption, as well as environmental degradation.
“Having visibility and strong supplier relationships at the first tier of the supply chain is clearly no longer enough, as these risks do not always exist in the first tier, but often further down supply chains.
“Best practice requires a thorough understanding by companies of who their suppliers are. Many procurement professionals will be confident they have this understanding, but this knowledge is incomplete. Professionals and buyers must have a licence to practise so business, and governments can be confident of where responsibility and accountability lies in purchasing decisions.
“We cannot allow even one more disaster to occur such is the urgency around these issues.”