The risk of reputational damage to an organisation as a result of poor supply chain management has never been more acute.
According to Alcumus’ Managing Supply Chain Risk whitepaper, 71% of companies say that supply chain risk is a significant factor in strategic decision making. As supply chains become ever more complex the need for robust auditing mechanisms to ensure ethical and safety compliance becomes ever more critical.
Why is risk management a cause for concern?
With 64% of business leaders reporting that they have a risk management programme in place, one can assume that the majority of companies know how to effectively keep any risks at bay, yet 45% of those surveyed (who have implemented a risk management programme) say they have little or no effect.
Damage to business reputation as a result of hiccups in the supply chain has a direct impact on the profitability and longevity of a business. Even renowned high street giants such as Tesco are not immune from supply chain error. Take for example the horsemeat scandal. Portrayed as a significant betrayal to consumer trust, Tesco suffered even though it was essentially a supplier rather than retailer error. The impact of incident also had a knock on effect on other major retailers, dragging competitor stores down as well. While the problem appears to have gone away, reputational harm does not dissolve overnight and such an episode will undoubtedly have a bearing on customer footfall and sales. Although this event happened over a year ago, it still remains fresh in everyone’s minds proving the point that businesses need to take a more proactive approach and work to pre-empt and reduce such risks if they want consumers to forgive and forget.
How can suppliers be managed correctly?
Suppliers remain a big problem when it comes to reputational risk. Alcumus’ whitepaper reveals that a 95% of consumers are angered by the delivery of an incorrect product or one which is late. This is a clear message to organisations to take a more hands-on approach to addressing such risks in order to better satisfy the evolving demands of consumers. Working more closely with partners and monitoring best practice will surely serve to deliver a more robust supply chain where deliveries are likely to become more accurate and timely and the risks associated with product recall and wastage, or even breaches in compliance are diminished.
If retailers and suppliers are to work as one then the importance of due diligence and, transparency and trust cannot be overstated. One way to achieve this is through second party auditing. Independent second party auditing occurs when an organisation audits its suppliers, or own facilities, to their own proprietary requirements (or standards). This ‘outside-in’ perspective acts as a catalyst for greater transparency and accountability and brings to the fore the risks associated with supply chain interdependencies.
So by keeping a watchful eye on critical part of operational delivery such as health & safety, environmental impact, product quality and social ethics, organisations will be better placed to maintain a steady connection between their suppliers and consumers thereby reducing the overall risk to their corporate reputation.
Alcumus has a proven track record in helping businesses assure the integrity of their supply chains and demonstrate best practice supplier management through the delivery of second party auditing services. Find us on Facebook, Twitter, Google+ and LinkedIn. You can also email us on: firstname.lastname@example.org or call us on 01296 678440.