Are you managing supply chain risk effectively?

In order to have a successful supply chain, businesses must be prepared for risks and employ strategies to prevent and manage such problems.

However, a mini-poll held during a webinar organised by Supply Management, in association with business information publisher Bureau van Dijk,  has found that 63 per cent of listeners do not believe that their organisations were managing threats in the best way.

The results highlight the importance for businesses to take threats to supply chain management seriously, with legislation for best practice going further than ever before.

Commenting on the findings, Ted Datta, strategic account director for Bureau van Dijk, explained that the negative response from listeners underlined a greater awareness from businesses and buyers as to the benefits and importance of good supply risk management.

Mr Datta emphasised that buyers need to follow new risks, monitor information and identify key strategic suppliers. Each of these aspects ought to be monitored in real time or as often as possible to enable ongoing review and close management. “Know your suppliers, business partners and third parties,” he explained.

Within a supply chain there are numerous different parties that must be investigated prior to beginning a working relationship. This ensures that they can offer the desired service, fit with the business’ ethos, and work efficiently and to predetermined financial, quality and time constraints.

Discussing the issue of effective supply chain risk management on the webinar, David Lyon, head of procurement at Cancer Research UK, explained the importance for undertaking numerous checks on suppliers and working closely with them throughout the supply chain cycle.

Mr Lyon told listeners that it is imperative for the charity that suppliers are aligned with its core purpose. “As an organisation that spends 80 per cent of every pound donated on our core mission of research, we must work hand in hand with all our suppliers,” he said.

This means identifying any possible links between suppliers and the tobacco industry and maintaining contingency plans should problems arise. With trust and reputation so important to buyers, long-term partnerships can be developed with suppliers should they meet the correct criteria of a business and consistently deliver contracts successfully.

While reputation is a major risk for supply chains, it can be equally costly for a business to suffer legal problems where suppliers cut corners or do not comply with legislation. This includes identifying and reporting if any laws have been broken and working swiftly to ensure that all processes and employees are compliant with international and industry legislation.

“Procurement must know what the rules are, help to identify any breaches and have clear reporting lines if there is a problem,” explained Alexandra Underwood, partner at law firm Fieldfisher.

Speaking on the webinar panel, she emphasised the need for businesses to pay attention to new legislation such as 2015’s Modern Slavery Act and the Bribery Act of 2011 and to immediately seek legal advice and raise any concerns with the correct authorities. Failure to do so could lead to large fines, imprisonment and severe consequences for a business’ brand and reputation.

Underwood went on to say: “Report it, don’t hide it, if you continue you could make things worse. Approach legal counsel as soon as possible so you will benefit from legal privilege.”

The importance of effective supply chain risk management continues to increase, with recent research from the Travelers Business Risk Index indicating that in 2014 more than a fifth of US manufacturers said they were not worried about potential problems. However, in 2015 only nine per cent of respondents agreed with this statement.

Top concerns included cyber threats, increasing employee benefit costs, legal liability, regulatory compliance and economic uncertainty. Yet despite such worries, only 50 per cent of companies surveyed reported having a written business continuity plan should problems with their supply chain management arise.

Our 2015 Mid-Year Report combines a review of the prevailing conditions in the risk management recruitment market with the results of a comprehensive compensation survey covering both permanent and contract risk managers.