The author, Alan Braithwaite, in his article, discusses the issues related to supply chain governance. The recent horse meat scandal gave food for thought to many procurement functions as to the legitimacy and honesty of suppliers in the supply chain.
The story behind the horse meat scandal was that many well-known and reputable firms were selling food items that contained traces of horse beef in it. This led to an uproar among people as they were being fed something very different to what was mentioned on the packaging. The root of the issue, according to many firms, were the members of the supply chain who substituted products fraudulently in order to make huge profits.
The rising inflation and costs have witnessed substitution and adulteration of genuine products with fraudulent, low cost and low quality products. High margin and high value goods are a temptation for many criminals that are a part of the supply chain. They usually substitute such goods with their low cost generic counterparts but sell it at the same high price. This allows them to make greater profits along the supply chain.
There are many other categories of products besides food items that are facing substitutions and adulteration. Categories like luxury goods, pharmaceuticals, car parts, aerospace components and other high margin sectors are facing the same issue. This means that the products that are dispatched from the firm do not reach the retailers in their original form. They are tampered with or changed. The same thing happens in case of raw materials. The items ordered are different from the ones that reach the manufacturing facility to be processed.
A recent research revealed that many firms were ignorant when it came to supply chain management and were not conducting any form of quality assurance or supervision over their supply chain. For firms, it is extremely important to monitor their suppliers as well as their distributors. This must be done in order to ensure that neither the raw materials nor the finished goods are of a different quality than what is mentioned on the product.
In case of own label products, retailers are responsible for monitoring the supply chain and in case of branded goods, brand leaders should ensure that the supply chain is not tampering with their products.
It is important for the procurement functions to be proactive. They should not compromise on quality or ignore the potential risk in order to purchase low cost goods. In most cases, it is evident that companies did not pay attention to what was happening in the supply chain and were oblivious to the non-conformance of suppliers.
Therefore, to avoid brand damage and maintain the reputation of their firm, companies should pay attention to their suppliers and retailers and ensure that appropriate supply chain governance is being practiced throughout the supply chain.