Lack of supply chain data presents growing risk for brand reputation
Large corporations are putting "blind faith" in the lower tiers of their global supply chains by not demanding greater transparency on sourced materials, products and services that could be putting their reputation at risk.
In the absence of accurate global data on suppliers, new research suggests that there is poor visibility at tiers two and three of international supply chains - leaving 75% of UK businesses who use suppliers outside of the UK exposed to the dangers of bad practice. An issue recently and starkly illustrated by the horsemeat scandal.
The report from Achilles and IFF Research reveals that more than half (53%) of businesses using international suppliers are not fully confident in their overseas supply chains and some 61% of organisations that procure outside the UK do not feel their supply chain helps them to identify and mitigate risk.
Furthermore, almost one quarter (23%) of UK companies said they are not confident in their database of overseas suppliers. The research found that nearly one in five (18%) companies in the UK holds absolutely no information about their tier two suppliers across the world.
This trend towards greater use of international suppliers when coupled with the low confidence of buyers in their ability to identify and mitigate risk suggests a latent complacency within corporate purchasing departments.
According to Achilles CEO Adrian Chamberlain, poor visibility of supplier data has the potential to impact shareholder value.
"If an incident occurs and it transpires that checks on supplier information and compliance are found wanting, consumer confidence in a brand can be quickly destroyed," he said.
Chamberlain points to what he calls 'black swan' events, such as the collapse of an eight-storey garment factory in Savar, Bangladesh, where more than 1,000 people died, and the resulting damaging press coverage for some 40 global fashion and retail brands.
"We are starting to see the consequences of this within the investment community," he asserted. "Already, 31 funds have called, via an Oxfam campaign, for the top 10 global food businesses to manage risks in their supply chain to protect shareholders' investments."
Interestingly, the findings of the Achilles report appear to conflict with a recent study by Aberdeen Group which found almost two thirds (63%) of companies put a high priority on improving supply chain visibility.
This suggests a gap between thinking and action on the issue - and highlights the need for one single, centralised global source of accurate and validated supplier information that stretches down through all tiers of the supply chain.
According to Chamberlain, many global companies wish to use a consistent approach to managing supplier information to create transparency and facilitate benchmarking of supplier performance.
This could be achieved in part by adopting cloud technology which would allow both small and large companies to centralise supplier data and offer access to it through a simple web browser, he suggested.