Why Supplier Compliance Software could be the best technology you implement this year!

Having a completely compliant supplier network is an ambitious goal for any business within the Food Industry. Many of us are acutely aware of how top-level insight and control over supplier compliance is crucial in preventing supply chain “blind spots” and brings forth the opportunity to  mitigate potential risks across your supply chain, end-to-end. This we know, will help to nurture consumer trust in our food safety and quality by, preventing any major PR disasters or damaging reports about our brands.  

Having a completely compliant supplier network is an ambitious goal for any business within the Food Industry. Many of us are acutely aware of how top-level insight and control over supplier compliance is crucial in preventing supply chain “blind spots” and brings forth the opportunity to  mitigate potential risks across your supply chain, end-to-end. This we know, will help to nurture consumer trust in our food safety and quality by, preventing any major PR disasters or damaging reports about our brands.  

Although many will agree that having visibility across supplier networks is of great benefit, many businesses continue to operate with gaps in their knowledge, not using supplier compliance software. A survey conducted by PWC found that as many as, 74% of companies did not have completed documentation from their third-party suppliers including inventory lists and a further 73% lacked incident response processes to report and manage breaches by third parties that handle data.  

The challenge in ensuring we cut down on the amount of missing compliance documentation arises when companies do not have complete visibility of their supply chain - a common problem considering the complexity and size of some networks. Also, with larger organisations, multiple ERP networks can often be used to manage different suppliers within a chain, leading to data silos, making it difficult to effectively manage, and track supplier compliance. 

Due to the growing pressure for businesses to ensure a compliant supply chain and communicate this with key stakeholders, we have highlighted below the dangers that arise as a result of poor management, and, importantly, simple steps that can be taken to improve supplier compliance with modern supplier compliance software 

Pressures impacting compliance within the Food Industry. 

Growing consumer scrutiny 

Supplier Compliance is necessary in every industry, however, there is a heightened awareness within the food industry due to the risks involved when food is contaminated, fraudulent or unsafe for consumption. Add to this the pressure of consumer expectation of the brands they buy from, and their interest in the lifecycle of their food products. Interestingly, recent studies highlighted the growing concern and interest over the supply chain amongst consumers, finding that as many as  90% of those aged 18 – 34 were interested in the farming and production process of their foods.  

Businesses now have to strive for complete transparency and visibility regarding their supplier compliance, with every link in their supply chains being magnified and scrutinised by a more aware, and informed consumer. 

Food borne illnesses and Covid-19  

The impacts of COVID-19 are still being felt globally, with a slow and uncertain return to, “normality”. Although the disease’s origins are still unclear, it has created a greater sensitivity to food safety, placing a spotlight on those businesses with global and expansive supply chains.  

Consumers want to feel safe, knowing that suppliers, even at the lower tiers of supply chains, are upholding standards, preventing any instances of contamination or adulteration.  

Brexit

The removal of the UK from the European Union has caused major upheavals and unrest within supply chains and the standards associated with them. The information needed from suppliers operating within the EU will now be different, meaning many food businesses could experience major turbulence in their compliance.  

Politicians and businesses alike have been warned by the UK Food and Drink Federation that they will experience a period of uncertainty, due to the re-engineering of supply chains, with potential losses across the sector.  

Before Brexit, UK standards and compliance regulations were covered under a blanket of EU law, allowing for free trade within the common market. However, we are now already seeing an increase in delays, product recalls and shortages due to this shock to supply networks.  

The dangers for businesses with non-compliant suppliers   

In the worst-case, businesses could face a halt in their production if a considerable proportion of their supply network are found to be non-compliant, with unsuitable documentation, outdated data or failing standards.  

This is not only due to the legal repercussions, but businesses have a duty to protect their consumers, and if operating with poor levels of compliance, they pose a major risk to the general public. 

PR disasters  

Issues with suppliers, caused by non-compliance, can seriously impact a brand’s image and consumer perception.  

Not only are businesses at risk of fines and potential barriers to trade, but poor visibility of supplier compliance can significantly impact a brand’s valuation.  

Take for example Boohoo - a strong name in the fashion industry, but when it was found that the employees of their suppliers in Leceister were experiencing poor working conditions and below average pay, (of which the brand was unaware), more than £1.5bn was wiped off the firm's valuation. 

Going forward the firm has vowed to make improvements to their corporate governance, compliance, and monitoring processes, implementing, “necessary enhancements” to its supplier audit, and compliance procedures. 

Although making a conscious effort to scramble back from this PR disaster, many consumers have since withdrawn support for the brand.  

This situation is all too common, particularly for businesses with expansive supply networks. They lack visibility and therefore, are unable to spot these kinds of compliance issues, however, when these issues surface it can have detrimental effects. 

Serious fines and future barriers to trading 

There are a wide range of legislative measures in place to ensure businesses are effectively managing their supplier compliance. In situations when a business is investigated, and found to have omissions in their supplier compliance, government bodies can enforce a variety of penalties, which can be monetary, revoking of licenses or a suspension on trade.  

Not only does this issue impact higher tiers within the supply chain, but these penalties can also cause a domino effect throughout an entire supply network. Often, if a retailer is met with a fine due to poor compliance, they themselves will enforce measures on suppliers to recover profits. In 2019 it was estimated by RSI that average-sized suppliers were paying, upwards of $1.6M in annual chargebacks due to non-compliance issues. 

Proactive solutions to mitigate supplier non-compliance

 Identify potential risks early and create a contingency plan 

As seen, there are a growing number of pressures facing modern food suppliers with regards to their supplier compliance. To minimise impact, businesses should work to identify the most probable risks and, from here, develop contingency plans to prevent any adverse effects. Although there are many situations that cannot be predicted, identifying - realistically- the riskiest suppliers and links, can enable businesses to become more agile and reduce risk.  

 Digital Supply chain management

The number one way to ensure compliance, end to end, and better manage suppliers is through digitising processes. Modern supplier compliance software will help businesses track their suppliers, giving visibility over who has the correct documentation, that is up to date and has passed relevant audits, which suppliers are due or soon to be due documentation renewal and which suppliers are causing risks within the chain. With supplier compliance software, all supplier information can be stored and accessible from one, mobile platform. In most cases, businesses also gain the ability to use advanced search tools to view specific data quickly.  

Relying on antiquated spreadsheets, word documents and email threads to manage global supply networks is extremely high risk, and prone to human error. Simply implementing supplier compliance software, businesses are bringing simplicity and transparency to their network, making managing supplier compliance a much less risky affair. 

Ensure Diversity across your supply chain. 

Rather than rely on one source, businesses should focus on building a network of well researched, and diverse suppliers, making their operation more risk averse and resilient to unforeseen disruptions. For example, if a region in Spain supplies a business with a raw ingredient and, the region is suddenly flagged for contamination, they will want to ensure they have a supply from another area, to prevent major delays.  

Quality assess your suppliers 

Realistically, if a supply network is made up of suppliers who have often failed checks or lack up to date documentation, the chances are a business will have poor compliance across their supply chain overall.  

It is important for businesses to stay on top of each of their suppliers’ documentation and track their individual progress to assess whether each has been consistent in meeting standards.  

Businesses should also work to create appropriate KPI’s and communicate the expected compliance levels that suppliers should meet. If suppliers fall below these standards; a business should be prepared to consider removing them from their network. Often businesses will have built strong relationships with their suppliers, however, the effort of sourcing a new supplier and building new connections, is outweighed by the potential backlash of, consistent non-compliance.  

Create preferred supplier scheme

Although this may not work in every instance, if a business has enough influence or, a large enough network, creating a preferred list of suppliers will help to ensure their compliance and drive-up compliance levels amongst others. With the possibility of losing contracts or falling out of favour, suppliers will go above and beyond to ensure they are compliant and are up to date with their documentation and checks.