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 that 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.

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Resource Credit | Food Stuff SA

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