Supply chains and horse burgers by Adrian Chamberlain, CEO of Achilles on 10-May-2013

Global businesses from every sector are leaving themselves vulnerable to major incidents like the horse meat scandal, due to a severe lack of knowledge surrounding their supply chains - yet are complacent about the potential risks, according to research from supply chain management expert Achilles.

The recent meat scandal highlighted the complexity of supply chains and the reliance on multiple tiers of suppliers all over the world. Research shows businesses still do not have visibility of their suppliers at Tier 2 and below, which presents a wide array of potential risks – not just for the food and drinks industry, but across the mining, manufacturing, construction, transport, warehouse, utilities and financial sectors.

Key findings include:

• One in five (18%) companies in the UK hold no information about their Tier 2 suppliers across the world
• The majority (62%) of UK businesses hold less information about Tier 2 suppliers than Tier 1 suppliers globally
• Although nearly all (95%) companies consider 'a supplier failing to deliver' as one of the main risks they seek to mitigate, only 16% hold the same level of information about Tier 2 suppliers as Tier 1 suppliers
• Despite the lack of information on Tier 2 suppliers, 92% of companies say they are are 'satisfied' that their current supply chain allows them to identify and mitigate potential risks

"Millions of people around the world have been directly affected by high-profile supply chain issues – from horsemeat burgers, to child labour in factories," said Adrian Chamberlain, CEO of Achilles.

"Yet our research suggests that global companies are still leaving themselves wide open to similar issues because they do not know who their Tier 2 suppliers are."

"Global businesses have revealed a significant lack of information about their supply chains while expressing a seemingly misplaced confidence in their data. This suggests that procurement professionals are either unaware of the risk posed by Tier 2 suppliers, or overly complacent in their existing systems."

"We need a step-change in industry where global businesses work collaboratively to address supply chain risks. By consistently identifying, evaluating, monitoring and auditing potential suppliers of all sizes and locations, global businesses could proactively prevent many of these problems."

"This is not just about the bottom line. People have a right to make informed choices – right down to the meals they serve at the dinner table."

The research showed the problem is particularly prevalent within domestic supply chains. Forty per cent of companies which procure exclusively in the UK hold no information at all on their suppliers’ suppliers. This is compared to only 12% of those who procure internationally.

Despite being close to the impact of the horse meat scandal, the wholesale and retail sectors had the least knowledge of their suppliers’ suppliers as a quarter (23%) had no information on Tier 2 suppliers.

The situation is also reflected among SMEs. A third (30%) of companies with a turnover below £25m have no information on their suppliers’ suppliers, compared to only 13% of companies with a turnover of over £1bn.

"It is likely that Tier 2 suppliers comprise a large number of SMEs and it is therefore concerning that large global buyers do not appear to have any visibility of these businesses," said Adrian. "By adopting one consistent approach to managing supply chains, global businesses would create a level playing field for companies, regardless of size or geographic location."

The lack of information about Tier 2 suppliers is all the more concerning when 43% of companies have known the failure of a high risk supplier to meet basic compliance requirements.

Achilles provides a Supply Chain Mapping tool which allows companies to 'map' their extended supply chains and view supply information beyond Tier 1 suppliers. An automated 'cascading invitation' from buyer to supplier to supplier’s supplier ad infinitum gathers comprehensive information about the supply chain, protecting buyers from global events and allowing best practice in the mitigation of risk.

Top 5 business risks to manage through the procurement process

No.	Risk	Percentage
1	Failure of a supplier to deliver the required service	91%
2	Financial failure of a supplier	83%
3	Risk to reputation of their own business	79%
4	Failure of a supplier to meet health & safety obligations	75%
5	Risk of being exposed to litigation	71%

For more information, please visit: www.achilles.co.uk/en

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