Risk Management Series 3: Supply Chain Disruption
Few topics have been higher up the risk agenda for food businesses in recent years than supply chain disruption, with Brexit, the COVID-19 pandemic and war in Ukraine looming large among the reasons why.
The range of adverse effects has included skills shortages, energy price hikes and delays to, or unavailability of, key food ingredients and products.
When a supplier runs into problems and cannot come up with key ingredients or products, what then?
“For us, supply chain disruption is second only to food safety risk, and the most significant area of emerging risks. You must have a back-up plan and be able to onboard new suppliers quickly, while managing the additional risks this entails. The risks remain the same, but the ability to act quickly is critical. You need to dig deeper and think differently about supplier onboarding to flex at pace and protect your brand.”
“With fresh food products and/or today’s ‘just in time’ methods there’s little room for supply chain errors. It’s critical to get a ‘plan B’ in place quickly to keep production lines running, fulfil contracts and get products to food outlets, retailers and consumers. But with that comes further risk, because when you switch suppliers at pace, you need to ensure the right due diligence review is done rigorously and quickly enough. Ultimately, you may no longer be certain that you can reach all your customer’s needs.”
“Adaptability means you have a Plan B in place – to ensure that when something does impact the supply chain, you can respond quickly and safely.”
Pinpoint Critical Risks
Risks around food authenticity and food fraud can easily emerge, with unscrupulous or unreliable new suppliers failing to provide what has been contracted.
Awareness that supplier issues and incidents can impact on your ability to trade is one thing, but being able to pinpoint critical risks, and then manage them, is the real challenge.
The solution lies in an approach that recognizes that as the risk profiles of critical suppliers change, so the threat potentially changes too. Once it has been established where the critical points of failure might sit, the challenge then is to stay up to date.
“As supply chains become longer and more complex, the opportunity for failure at critical points has increased. Detailed information is often lacking in these areas.”
The experts agree that the key question is: what’s the next crisis going to be and how vigilant can we be to avoid it or mitigate its impact?
Horizon scanning is vital, as is gaining a risk profile not only of suppliers, but also of individual products – the food safety risks from delays, for example, are very different for fresh coleslaw than for canned beans.
Food businesses are increasingly improving their understanding by building risk weighting or risk evaluation into their core sourcing and supply chain management protocols, with data generated by supplier self-assessment or external checks on the quality of their controls, for example through GFSI certification audits.
Technical standards are not the same everywhere, so it is important to understand them all.
“Processes can be cumbersome to implement quickly if the need for new suppliers is urgent, but the importance of GFSI schemes and partners for certification shouldn’t be underestimated.”
Technology Can Help Lift the Load
People and technology are pivotal. The role of food risk professionals is vital in bringing together the necessary business functions – procurement, information and communication technologies (ICT), finance, and operations – to embed a strategic plan that ensures business continuity in the event of an incident, and helps to instill resilience throughout the organization and, through collaboration, the wider food industry.
“The biggest challenge is the ability – or not – to perform root cause analysis. We will never stop supply chain risks from emerging, but we must understand what really went wrong, and learn from it. There are repeat issues everywhere! There are experts and technologies that can offer solutions, so ultimately, it’s down to food businesses to invest to improve their understanding of supply chain risks, build resilience, protect their reputation and gain competitive advantage.”
“There is enormous potential to mine data better, analyze trends and bring predictive analytics to bear. We can either sit on it or use it. It’s powerful, but we’re not yet harnessing it fully – and there’s still a lot of paper out there.”
What’s the Solution?
- Whatever form they take, disruptions to supply chains are sometimes unavoidable. The critical solution is to have a Plan B, so when you do need to implement a change, you can do so seamlessly.
- Having strong lines of communication and collaboration throughout your business and supply chain will build an environment of trust. Having suppliers already on standby who can step in when required is a strong position to be in – or otherwise, having a robust and swift onboarding process in case the unexpected happens.
- There are also tools on the market to help you manage suppliers and specifications online – enabling you to pivot when you need to.
- Have you created a food defence plan? Regularly running mock recall exercises? Have contingency plans and ongoing risk assessment in your supplier management program? All these actions can help you manage a situation when you really need to act swiftly – to protect your consumers, your supply chain and your business.
Contributors to This Article:
- The Global Risk Director of an NSF Food Client
- Alison Friel, Director, NSF Food Consulting and Training, Northern Europe
- Wouter Conradie, Director, Supply Chain Food Safety, Europe and Africa
- George Gansner, Global Senior Managing Director, NSF Food Consulting, Training, Sustainability and Digital Solutions