Supply Chain Risk

Martin Coates

©Agrantec Limited

Introduction

• Risks in a supply chain – Availability/price – Currency/political – Specification – Regulation

• Compliance • Packaging

– Safety – Fraud – Systems/Culture/Awareness/Knowledge/Skills – Supplier Performance

• Not specifically discussing – Labs – Other detection – Insurance and financial instruments

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Myths

• Design risk mgmt around stable supplier relationships

– This is business, change happens

• Localism

– This is marketing not risk management

– Short supply chains must make commercial sense

• It’s a dead cost

• It’s about fraud

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Fraud Characteristics

• Adulteration

• Substitution

– Age

– Country of origin

• Contamination

– Trace level v ingredient level

• Brand v Fraud

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Impact of Risk

• Brand damage • Relationships broken • Ripped off

– Quality – Age

• Safety compromised – Bacteria – Allergens – Contaminants, inc physical particles, cleaning residue

• Re-work/lost product • Audit failure

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Worse Consequences

• Prison, up to 2 years

• Fines and penalties, can be unlimited

• Cost to recall-cases can cost £20m

• Loss of business-incalculable

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Positive Side

• Brand authenticity and trust

• Reduce management costs

• Consistency

• …

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STARTING POINT

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System Analysis

• To manage risk requires systematic analysis – Specification – Process

• Within your business • From source to your goods in • From your despatch out

– People • Training, awareness, understanding, culture

– Paper • Evidence and enablement

– IT • Evidence and enablement, speed

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Specification

• Details – Contents

– Weight

– Quality measures

– Packaging/labelling

– Temperature handling

– Bacterial and other contaminants

– Special measures v legal minimum

• Every item needs a control

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PROCESS

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Risk Analysis

Brand Message

Brand Value 1

Action 1 Action 2

Brand Value 2

Action 3

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Risk Analysis

Action1 Supplier1 Supplier2

Action2 Product1 Product2

Action3 Ingredient source1

Ingredient source2

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Chain Analysis

Ingredient • Specification(s)

Supplier1 • Company Specifications

Subsupplier •Data supply requirements

Ingredient •Specification(s)

Supplier1 •Company Specifications

Subsupplier •Data supply requirements

Subsupplier

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And change

• Bottom of the chain ripples to the top

• People

• Formulations

• Sub suppliers…

• One off v continuous

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PEOPLE

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Competence

• Labelling

• Packaging

• Composition or reformulation changes

• Hygiene and other handling practices

– Contamination

• Culture

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Probability, Percentages and People

• Risk is expressed as % probability

• Most people don’t understand % probability

• What about % contamination?

• Use terminology that is understood

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VALUE OF PAPER

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Supplier Paper Trace

Trace request Trace request Trace request

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Paper

Original Updated

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Isolation Information Supply

Chain

Original

Updated

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IT

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Data Collection

• Supplier inc haulier-relatively static – Location – Process – Certifications

• Ingredient-quality/characteristics-relatively static • Data chain-transactional

– Process event – Date/time/location – Result (e.g. weight, temperature, test result) – Who

• Today is one up one down – No corroboration

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SHARE THE COSTS

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Confidentiality and collaboration

• Cost of compliance

– Keeping records

– Re-keying data

– Reviewing/collating

• Leading food industry experts recommend data sharing

• Social media search

– Customers do it to you

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Collaboration

Internet

Validated link Validated link Validated link

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Electronic Original

• Date claimed

• Description

• Entered by

•Date entered

•Log in id and timestamp

Electronic Finger Print

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Real time every time all the time

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Myths Revisited

• Design risk around stable supplier relationships – You specify, they deliver, you pay

• Localism – Authenticity in the internet age – Long chains mean more analysis work – Social media can work for business

• It’s a dead cost – Brand linked to chain is about profit – Data is simple and can be shared

• It’s about fraud – There are many more issues

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Strategic Themes

• Focus on brand related activities

– Plus the legal minimum

• Share data for corroboration

– Eliminate paper

– Real time communication of change/error

• People centric

– Social media effects everything-authenticity

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