The sustainable sourcing of food-it’s all about the tiers!

The sustainable sourcing of food – it’s all about the tiers

Dan White Blog, FMCG, Supply Chain

What does it actually mean?

Sustainable sourcing is generally used to describe a holistic approach to a procurement exercise, focusing not only on commercial factors, but also the environmental and societal impact of what we plan to do. To some organisations, sustainable sourcing is dealt with by the publication of a CSR policy on the company website, to others it means a great deal more. As we go about our professional lives in business, we regularly encounter terms such as sustainability, ethics, corporate social responsibility, but, do we as procurement professionals truly understand the importance of our role in driving the agenda, and understand where the key challenges remain?

How did we get here?

The food supply chain today is more complex than ever before; consumers’ expectations around choice, availability and value-for-money are central to this. Having spent time working at one of the world’s largest food businesses, I would say that few products, if any, evoke the same level of emotion as food.  The furore caused by the 2013 horse meat scandal, one of Europe’s largest ever food safety breaches, is just one case in point. Despite most large UK-based food businesses having CSR policies in place, and mountains of audit files and accreditations paying tribute to their ways of working, few avoided being caught out in one way or another.

Remarkably, a 2015 survey commissioned by Achilles highlighted that 65% of businesses still acknowledged that they needed a more effective system for managing their supply chains, owing to their ever-increasing complexity. In the years since, the challenge of cleaning up the mess has dropped squarely at the door of procurement, and as the gatekeepers of our supply chains, rightly so!

The risks of the unknown

Between 1997 and 2015 the value of UK food and non-alcoholic beverage imports increased by more than 130%. This shift signifies the impact of globalisation on the food and beverage supply chain and has resulted in us having more supply options available to us than ever before. With the backdrop of increasing demand and competition between producers and manufacturers, many organisations have been able to introduce new, less traditional supply solutions which have contributed significantly to the profitability of their businesses. The unavoidable consequence is, of course, the challenge of truly understanding your supply chain, and the susceptibility to the risks associated with the unknown. Only a few weeks ago, KFC has found itself in the news for shutting half of its 900 outlets in the UK due to supply chain failures at their new delivery partner DHL. Of course, these situations cannot always be avoided, but serve as a timely reminder to procurement professionals, of the importance in considering factors other than cost alone.

It is often mentioned in business, that everything which gets measured gets managed, so how can we manage the risks present throughout our supply chains, if we are not in possession of all the facts? This issue is, of course, not unique to food. The fashion industry is just one other industry which has experienced similar levels of scrutiny due to low-cost country sourcing during recent years, particularly in response to the Rana Plaza clothing factory collapse in 2013, which claimed over 1000 lives.

So, what next?

Procurement is key to unlocking value in this area, and supply chain transparency is critical to success. I am not proposing a new strategy for solving the issues related to sustainable sourcing, instead, I am highlighting the risks of not putting its consideration at the front and centre of everything we do.

Managing supply chain risk is something that we, as procurement professionals, do each day. However, can we really say that the tick-boxes on tender documents, the tyre-kicking on factory walks, and the annual audit processes are all we need to do? While these practices are valuable, they only really scratch the surface. The need for supply chain transparency goes way beyond having visibility of your direct tier one suppliers; provenance is king among today’s consumers.

In the kaleidoscope which is a food supply chain, the importance of developing a sourcing strategy that engages with all tiers of the chain- from farm to fork- is paramount. Following on from the fallout of Horsegate, the reputational and commercial damage caused by poorly-managed supply chains is well-known, and it is therefore incumbent upon us to take ownership of the problem. The most effective way for us to do this, is by continuously scrutinising our own supply chain and investing in technologies to help us along the way.

It is not all about managing risk, however; a clean and agile supply chain benefits productivity, enables timely response to crises, fosters strong working relationships, and gives a level of resilience which should not be underestimated! It goes without saying that there are significant costs associated with achieving a fully-visible and sustainable supply chain, but having considered the risks, can we really afford not to embrace them?