Horse meat saga reveals lack of visibility in supply chains

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The discovery of horse meat in a number of supermarket products has outraged the British public and led to a call for more stringent checks. One of the most disturbing elements of the story is the lack of clarity regarding which company is responsible for the contamination.

Retailers and suppliers have all taken to blaming each other. Aldi, Findus and Tesco have ceased working with Comigel, a French food processing company, which has been accused of not carrying out appropriate checks. Comigel has in turn blamed another French supplier.

There have been claims that the origin of the meat lies in Romania, although this has been denied by the Romanian government. Reports are now emerging that criminal gangs may have played an important role in sourcing the meat in question.

A Wake up Call for Retailers

Two main elements have combined to make supply chain risk greater than ever before. The first is the global nature of modern business. Supply chains now span across the globe and are consequently difficult to track. Secondly, in the current climate of austerity, suppliers are under huge pressure to do more for less. At a recent4C hosted debate, it was suggested that many suppliers may have been pushed to their limit.

A combination of the above leaves suppliers in a position where they may be more open to taking risks. This can result in inflexible supply chains, a lower level of surveillance and even a disregard for rules and regulations. Not having visibility of tier two, three and even four suppliers, means companies such as Tesco, find themselves reacting to events rather than putting plans in place to deal with potential threats.

Countering Supply Risk

Complex supply chains and a drive to reduce costs have made the monitoring, auditing and tracing of suppliers an essential element of managing risk. The horse meat scandal has only served to highlight this issue and with many retailers and suppliers currently carrying out DNA tests, it is likely that more breaches will be found.

In terms of developing a sustainable solution, effective SRM can play a key role in reducing risks and increasing visibility.  A well-run, collaborative process can ensure value for all parties, through lower costs, mitigated risks, increased efficiency and quality, innovative methods and faster time to market.

For more on Managing Risk you can read 4C’s summary of the “Risk Insights” panel at The Economist’s CFO Summit 2013.

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