The importance of managing risk in food supply chains

supply chain

SGS hosted a special session at the recent GFSI Global Food Safety Conference 2019 in Nice, where it revealed the results of its 2018 survey into current food supply chain industry practices.

The annual GFSI GFSI Food Safety Conference attracted over 1,000 delegates from around the world, with representatives from governments, the food industry, and academia. Donna Brown Crockart, Business Manager, South Africa, SGS, Agriculture, Food & Life Sciences, was there and compiled this report.

Managing Supply Chain Risks – How Has the Food Industry Evolved in Recent Years?

Figures produced by WHO estimates around 600 million people are annually affected by foodborne diseases, and 420,000 died from them. It is statistics like these which have made Donna a ‘food safety activist’. The event looked at how businesses at the cutting-edge of safe food supply are finding ways to identify and mitigate their risk in their supply chains.

Risk is not something every operator considers important; in 2018, Global Supply Risk Report found that 90% of businesses still did not quantify risk when making outsourcing decisions.

We cannot underestimate the importance of ensuring food supply chains are safe and comply with relevant regulations. The key to this has to be the utilization of an effective supply chain management system. This will not only help to protect consumers, but it would also aid businesses in maintaining efficient supply chains.

In 2014, Managing Risk in Globa Supply Chain stated that 85% of companies with global supply chains had experienced at least one disruption in the previous year. An effective supply chain management system will diminish the consequences of these disruptions.

Donna continued her talk by detailing the results of SGS’s recent survey into current global industry practices. Started in Q4 of 2018, the survey combined data from 290 participants, operating in 65 countries, and provides several indications of where supply chain management can be improved to promote better food safety practices.

Supply Chain Management Survey: Selected Findings

The survey found that food safety remained the number one priority for businesses (90%), followed by regulatory compliance (88.2%) and traceability (84.48%).

Respondents also expressed the view that regulatory non-compliance had the greatest potential for negative impact on their businesses (70.7%), followed by quality performance (65.5%), food safety crises (63.1%), supply chain interruptions (59.3%) and food fraud (57.9%).

Worryingly, 87% of responders believed their company’s approach to supply risk management was “not very effective”, with the survey showing 46% of businesses focused only on Tier-1 suppliers and 68% relying on Tier-1 suppliers to manage their own supply chains.

While 57% of responders did see a benefit in implementing a supply chain management tool, 45% don’t currently employ such a tool.

These figures might contribute towards an explanation for why the industry has such low levels of confidence in its supply chain management practices: only 19% felt their system was effective at managing Tier-1 suppliers and only 8.3% reckoned it was effective at managing Tier-2 downstream.

Only 13.8% of responders felt their system could effectively identify and assess risk in the supply chain, with 12.8% feeling their system offered effective risk management and mitigation.

Delegates were surprised to learn that only 28% of those surveyed felt their company employed a supplier selection and approval process that they would describe as “very effective”.

72.4% of respondents stated that supplier certification status was the dominant factor affecting their supplier selection, followed by the supplier’s commitment to quality and safety at 71.4%.

Of less concern when selecting a supplier were internal quality and safety standards (48.6%) and technical expertise (47.9%).

The survey also demonstrated that the key obstacles to effective supply chain management were seen as being:

  • poor communication and collaboration (60%)
  • poor supplier understanding of the required regulatory compliance (49%)
  • an underestimation of risk impacts (47%)
  • the cost of implementing supply chain risk management strategies (45.2%)
  • a lack of end-to-end visibility, traceability, and transparency (44.8%)

Finally, the survey showed that 54.8% of responders intended to conduct risk audits of key suppliers to improve their supply chain management. In addition, 41% said they expected to create a supplier risk register, 35.9% planned to carry out formal mapping of their suppliers, and 25% would introduce a supply chain management system.

Among the conclusions from the survey was the fact industry still recognized the importance of introducing effective supply chain management systems. It was clear from the SGS survey, however, that one of the main obstacles to implementing such systems was cost.

Recently published data (In Creating Value in Outsourcing Relationships Through Transparency 2018), indicated that 4-5% additional return on equity could be achieved when utilizing an effective third-party risk management system.

With WHO figures showing us the true cost of failing to provide safe food and the fact that so many businesses are negatively impacted by supply chain disruptions, there was an overall consensus that the short and long-term benefits of implementing a supply chain solution outweigh the costs.

The industry should take a more holistic view of the impacts disruptions to supply chain could cause across the overall organization. Effective risk management strategies require scenario planning and putting processes in place as well as implementing the right technologies able to sense and respond to events as these happen.

It is a matter of identifying what is right for your organization and having the capability to manage the changes in practices and culture that such implementation will bring both within your organization and across your supply chain.

allonline365 offers affordable software for your business that grows with your company. If you need some business management software advice you can contact us on  info@allonline365.com or  +27 (21) 205 3650.

www.allonline365.com

Resource Credit | Food Stuff SA

How SMEs can effectively manage cash flow

cash flow

Managing cash flow is an extremely critical aspect of financial planning for many businesses, especially SMEs. It’s an area which can often be difficult to control and could see benefit from tighter monitoring and planning. Many SMEs struggle to properly manage and maintain positive cash flow and research suggests that 63% of SME decision-makers worry about their business’ cash flow. Irrespective of industry size, one thing stands to reason, if the expenses generated by the businesses exceed the amount of cash coming in – then you have a cash flow problem.

Staying on top of outgoings and debtors requires a diligent and well-organized approach. In the first instance, it’s important for SMEs to look at areas of expenditure and try and identify where they can make long-term savings. One such area which tends to be overlooked time and time again is corporate travel and expenses. The proper management of expenses can give businesses a huge advantage, but when handled inadequately the management of corporate expenses can be crippling. As a starting point, SMEs should evaluate their current expense procedures and pinpoint the aspects which are easy to exploit and put sufficient policies in place to ensure they are not being taken advantage of.

Empyting the unofficial piggy bank

There are areas of the expenses process which are easier to manipulate than others and we tend to see the same pattern f claiming behaviour over and over again, across countless businesses. Typically, businesses will get four distinctive spikes in expense claims throughout the year. The first is around Easter, the second just before the school holidays and the last two before Christmas –  one at the end of November and the other halfway through December. During these peak periods, employees can often claim up to 8o% more than they would during a ‘normal’ week. For instance, if an employee regularly submits claims of around R200 a week were to stockpile their receipts over four or five months, the business could be hit with a claim of nearly R4,000. Stockpiling expenses is one of the biggest challenges SMEs face, especially employees who use the expense system as a piggy bank. Of course, employees should be able to easily claim back funds but it shouldn’t be to the detriment of the business’s cash flow.

One of the ways to get around the issue of “piggy banking” is to put expense policies in place which restrict the timeframe in which employees can submit their claims. Setting a time limit of around one to two months encourages employees to keep up to date with claims and stops them from building up large sums. This not only limits the financial impact on the business but also goes some way towards regulating cash flow.

Fraudulent claims

The second most common area of the expense process which is ripe for misuse is the submission of fraudulent claims. Now, of course not all employees will manipulate the expense system in this way but it does pay for SMEs to carry out proper due diligence and check the information which is being submitted to them. Whether it’s creating fake hotel invoices then staying with a friend/relative and pocketing the accommodation allowance. Or claiming multiple reimbursements from the same train journey by submitting the ticket and collection receipt separately. SMEs should be making sure that the expense claims put forward by employees are in fact genuine, otherwise money is leaving the businesses needlessly and employees are tapping into money which they aren’t entitled to. Putting clear policies in place is key to helping employees correctly navigate the expense process but what if your business doesn’t have the time and resources to sift through and check countless receipts?

Tapping into technology

Most SMEs have already bought into the benefits of cloud-based applications and use them across various functions of the business. Implementing a digital expense management solution could be an alternative to manually checking claims and offers the opportunity to enhance control of employee spending by automating policy enforcement. This would mean that out of policy expenses would be instantly flagged upon submission. Whether they are claims which appear to be duplicated or those which go over the spending allowance, the system would raise these issues and return them to an administrator for extra justification.

With the expenses policy laid our clearly, employees are then able to make fully informed decisions before making a purchase to claim for. It also affords business owners the ability to watch what employees are spending in real-time, instead of waiting until the end of the month to read an expense report. With the digital expense system clearly spelling out policies and spending limits, employees are also required to take photos and upload images of their receipts. This additional layer of accountability can help SMEs tackle misuse of the expenses process and hopefully stabilize cash flow in this aspect of the business.

Introducing automated solutions into the expense process can also help SMEs to recover the maximum amount of VAT possible and take active steps towards positive cash flow. By prompting employees to correctly classify claims such as subsistence, travel, meals or accommodation, businesses can ensure they are paying the right level of VAT on expense items. It also offers up the opportunity to ensure employees are entering the correct VAT figures on purchase.

FOR SMEs it’s worthwhile identifying areas of weakness in the expenses process as they can have a large impact on cash flow. From the examples above it is easy to see how fraudulent claims can slip through the cracks and quickly add up. The ability to properly manage and control employee expenses, not only saves SMEs time and money but also ensures that the right processes are in place to maintain the business. Only by staying on top of outgoings and having full financial visibility can business owners stay in control, make informed decisions and support future growth.

If you are looking to explore cloud-based options, allonline365 can offer advice on the solution that best fits our business needs. Contact us on  info@allonline365.com or +27 (21) 205 3650

www.allonline365.com

Resource Credit | Finance Digest 

Digitalization is here – the time to prepare is now

business's

Digitalization is at the heart of any business’s efforts towards process optimization to create time for growth. Wolters Kluwer has noticed a trend in businesses with best-of-breed disparate software products, moving to an integrated software suite to drive process optimization and efficiency.

The move to digitalization is firmly in motion and remaining competitive is key. Moving to a centralized suite of products that drive efficiency and differentiates your business from the competition will enable you to grow as the market changes.

Business’s are reviewing mundane and manual processes that have previously been managed on Microsoft Excel, like workflow management. Automating these tasks with an integrated software suite will mean your practice is managing processes by exception, rather than by manual intervention at each step. Your software can be set to drive processes like data capture across the solutions automatically, rather than you needing to update spreadsheets or disparate products.  You will then be alerted to any abnormalities, rather than managing the norm manually.

Overhauling your software and how your business currently processes information may not seem like a priority right now, it can seem daunting and will cause business interruption. But with the benefits in mind, all that’s needed is a step-by-step plan to get there.

What are the next steps?

If your business intends to make a full suite switch and kickstart a change programme, then spending time upfront planning the transition is key. Once you have your strategy in place it is important to choose the right software partner, have an appropriate communications plan internally and externally, and to train and inspire your staff to use your new digital tools.

Step 1: Define your goals

Spending time identifying any problems and potential areas for improvement will help you define SMART (specific, measurable, achievable, relevant and time-bound) goals. After defining your goals, spend some time creating a vision of how this will improve your business and what the positive impact will be for your clients and staff.

  • Identify which strategic issues you would like to address with your suite switch plan
  • Assess market opportunities and threats
  • Use a survey to understand your current customer satisfaction. What part of your service can you improve on?
  • Complete a SWOT (strengths, weaknesses, opportunities, and threats) to understand where opportunities exist for your business
  • Create a vision of where you would like to see your business in 10 years time. What resources do you need to accomplish your vision?

Step 2: Setting strategy and achieving buy-in

Create a strategy that delivers the desired business benefits on time and within budget. Defining the right strategy can take time but is crucial to success.

  • Define your business’s core purpose
  • Finesse your business’s unique advantage
  • Establish an approach for how you will succeed
  • Develop a plan with six or fewer objectives

Work with your senior team to create a robust strategy which considers other change programmes which may be running concurrently. Create a list of key processes and staff which will be affected by the change. This enables you to map-out lines of communication and subsequent engagement. Can the process be revised and changed that makes quick and demonstrable improvements to the business?

Step 3: Finding a new software suite fit for your business

It is crucial to understand your current systems and processes – this will determine the level of investment required as well as the depth and type of change needed.

  • Review your current software and evaluate whether any inefficiencies are due to technology. Are all features and tools being used optimally for your business?
  • Consider the cost of the current software and new software as well as the time and costs saved by new gains.
  • Identify what the critical success factors are in establishing this change.
  • Draw up a list of must haves and a list of areas of where you might be willing to compromise.
  • Decide what are the key products and integrations you will need to support your current processes.
  • Consider if the new software supplier fills your needs from ongoing support, digital training, face-to-face training, consultancy, and knowledgebase point of view.

Step 4: Communicate often and well

The key to communicating change successfully is to create a message that reduces uncertainty and creates understanding. A successful change message should manage expectations and reduce the gap between what people assume will happen and what is the strategic plan. External communications are also vitally important. Prepare a narrative to share with our clients on how the software suite change will impact them.

Some information to address with clients if applicable:

  • How will it improve the service you currently offer them and what will the benefits be?
  • What additional services will you be able to offer them as a result?
  • What reassurances can you offer them that transition to any new technology will not impact on the services you offer? For example, can you run the old and the new software concurrently until the new software has been firmly bedded-in?
  • What reassurances can you offer your clients on the safety of their data?

Step 5: Getting the most out of your integrated suite

Once your software is live, test and measure how efficiently it operates to ensure that it meets your original goals. Gather feedback from employees, those using the system can offer valuable insight and will appreciate that their feedback has been acted upon. Training is essential and should be iterative, undertaken often but not overbearing or too long. Making change simple and straightforward is important – along with continuing to explain the reasons why the change is taking place. The tracking of KPI’s and metrics should be carefully adhered to.

Finding the right software partner will ensure that your team receives the right level of support and will reduce the impact on your business. Be honest about your business’s needs. Implementing a full suite switch is not a small task but it is an opportunity to lay the foundations for sustainable growth.

allonline365 offers a range of solutions that can be adapted to your full suite needs. We handle implementation, training and offer support. You can contact us on  info@allonline365.com or  +27 (21) 205 3650

www.allonline365.com

Resource Credit | Accounting WEB

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