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Supplying demands - the importance of standards in supply chain management
22 Sep 2010
Topics: Supply chain, Food safety, Risk management, Construction, Retail
Consumers are increasingly questioning where the goods they take for granted come from. They want to know that their purchases have been produced responsibly, ethically and safely. Businesses therefore need to be confident that they can show exactly how their supplies and products have been sourced and travelled through the supply chain.
The products we routinely pick up off the supermarket shelves today may have travelled thousands of miles to reach the retailer's shelves. Clothes, electronic goods and food are frequently manufactured or grown in countries far from where they are bought, and this raises a whole host of ethical issues as to the precise conditions under which they have been produced.
Examples of growing concern at the way goods are produced are numerous, but perhaps one of the most obvious is the surge during the last decade in the popularity of the Fairtrade movement, and its associated Fairtrade mark, which ensures that disadvantaged farmers and workers in developing countries have not been exploited, and therefore get a better deal.
Even in the midst of the huge global economic downturn sales of Fairtrade products have continued to grow strongly. In May this year the Fairtrade Foundation said that consumers around the world had spent approximately €3.4bn on its goods in 2009 - up 15 per cent on the level of sales in 2008.[1] Cocoa and sugar sales leapt by 35 per cent and 37 per cent respectively, with coffee - the pioneering Fairtrade product - climbing a certainly respectable 12 per cent as well.
In its report the foundation also stressed that this growth was truly international. Sales in Eastern Europe and South Africa grew "exponentially", it said. In Australia and New Zealand trade more than doubled (up 58 per cent), and the US and UK saw more modest, but still assured, increases of seven and 12 per cent respectively.
"As 2009 began in the midst of the worst recession in 70 years, we were worried that Fairtrade producers could lose sales," explained Rob Cameron, the CEO of Fairtrade Labelling Organisations International (FLOI). "Instead, consumers across the globe bucked the trend and proved their deep commitment to giving producers a fair deal. Fairtade sales grew in all countries."
And the Fairtrade initiative covers more than food. Fairtrade cotton has now been in the UK for five years, benefiting for example, cotton farmers in India, Egypt and Peru. In addition to a fair minimum price for their produce, sales of Fairtade bedding have led to funding for local projects such as health awareness initiatives and the construction of better storage facilities on farms. A pilot partnership between Fairtrade and the Forest Stewardship Council (FSC) is also exploring possibilities for responsible timber sourcing.
Tools for trade
In many industries supply chains are extremely complicated, requiring careful management to ensure that, for example, both product quality is high and working conditions are socially acceptable as well as ensuring that supplies are delivered when they are needed. To ensure that these requirements are met and to mitigate the risks involved, standard-based solutions can play a key part in ensuring that supply chains are well managed.
"Everything is multiplying," says Paul Stanfield, product marketing manager at BSI for its supply chain compliance management platform called Entropy® Software. "You have larger companies, sourcing products from the other side of the world, but also more products being sourced by smaller companies from suppliers in more distant countries. The problem then is that business are also increasing their risk of quality breakdown and working condition blindness.
"Brand damage can significantly affect a company's stock market listing as well as its stakeholder reputation in the marketplace. It can mean massive quantitative damage. In order to protect yourself one of the most important things you can do is to get a handle on what is happening on the ground where your supplies are sourced."
How can you mitigate this risk? Effective supply chain compliance management can help. By implementing a solution such as BSI's Entropy® Software, a company can keep track of all the sourcing developments in its international networks. The solution will alert the organization to any instances of non-compliance quickly, enabling corrective and preventive action to be taken to stop the problems from perpetuating and escalating.
A prime example of the challenge has been in the fashion industry. For example, the UK retailer Primark implemented Entropy® Software to help manage its challenging supply chain in 2009.[2]
"In recent years competitive pressures and globalization have led many leading retailers to rely on the ever-extending global supply chain," said Rob Wallis, managing director of BSI EMEA. "As a result, many big-brand companies have recognised the need to take responsibility for the ethical performance of their supply chain."
Primark sells goods sourced from many hundreds of suppliers spread across China and South Asia. It joined the Ethical Trade Initiative in 2006, and had already published its own supplier code of conduct, but invested in BSI's software to gain a greater degree of sustained global visibility and real-time risk awareness. The solution simplifies the supplier auditing process, highlights instances of non-conformance with Primark's code and manages remedial actions to be taken when necessary.
"This is a demonstration of Primark's commitment to having the best available solutions to help manage its supply chain, and to improve working conditions at source whilst maintaining competitive edge and quality in a fast-moving fashion environment," said the company's business systems analyst, Ray Ellis.
Other international companies that have selected Entropy® Software include Levi Strauss, GSK and Kellogg. The software need not only be used to monitor ethical performance in the supply chain, for example, Coca-Cola Hellenic Bottling Company uses Entropy® Software to capture its environmental, health and safety, and supply chain data about all its multinational facilities. Among these many other business deliverables, the company also easily produces corporate social responsibility (CSR) reports covering 80 sites in its 28 different countries of operation.
Standards supply
Meanwhile, the increasing interest in new building environmental assessment methods - which make sustainability credentials entirely clear - is fuelling demand for more measurable evidence of supply chain traceability in the construction sector. Business standards in this sector are ideally placed to provide this reassurance.
For example, in June this year Tarmac became the first company certified by BSI to the standard BES 6001 - Responsible sourcing of construction products. Covering the UK Tarmac business and subsidiary Tarmac Building Products Ltd, BES 6001 will help the organization to show its customers that it is sourcing a wide range of materials sustainably and therefore responsibly. These include cement, gravel, concrete, blocks mortar and sands.
Dr Martyn Kenny, Tarmac's head of sustainability, explained: "We have both legal and moral duties to source responsibly but it also makes good business sense. Implementing BES 6001 has enhanced our corporate profile and reputation and resulted in positive commercial benefits.[3]
"As a commercial business it is good practice to be able to supply products that customers want and feel are produced acceptably. Economic stability created by having steady demand for products and services is very important for maintaining a sustainable business."
"An additional benefit of certification has been to identify improvement opportunities in processes, data collection and analysis," he added.
Food for thought
Another significant area where supply-chain monitoring plays a critical role is in food safety. The slightest suggestion of a food safety problem in a country's or business's food chain can be and often is extremely bad and in many cases damaging news, potentially placing not only a company's reputation but often a country's reputation for providing safe products in grave peril.
For example, in August 2010 the UK media were reporting that calves born, slaughtered and sold as meat for human consumption in the UK were the offspring from a cloned cow in the US. It has been confirmed that some of the meat had been consumed in Scotland and meat from a second cow had been exported to Belgium.
The UK regulator, the Food Standards Agency (FSA), has said there is no evidence to suggest a food safety risk from consuming cloned animals, but that aside the authorities should have been notified in advance. Why? Because foods from cloned animals fall under the European Commission's "Novel Foods Regulation", which requires new novel food products to be evaluated for safety and cleared by all EU member states.
The incident highlights just how important it is to have a rigorous process in place for verifying the origins of any products intended to be consumed by humans.
The many parties involved, both as direct suppliers and working as agents, and the rapid movement of a modern commercial supply chain, mean the likelihood of communication breakdowns or management systems errors can be significantly increased. Working towards supply chain management standards can help mitigate this risk effectively. Management system standards develop and embrace systems of communication in the supply chain and ongoing monitoring to ensure that compliance obligations are met and general standards improved.
Take for example BS EN ISO 22000:2005 Food safety management systems - Requirements for any organization in the food chain. This standard has supply chain communication as one of its fundamental requirements in addition to system and process monitoring requirements. Such is the breadth of the food supply chain, that the opportunity to enhance these requirements has already been identified for programmes in the food manufacturing sector such as purchasing, product and consumer information, and food defence and are embraced in BSI's PAS 220 Pre-requisite programmes for food safety in food manufacturing. This standard has now been adopted by ISO as ISO/TS 22002-1. Going forward, and building the PAS 220 principle into other areas of the food supply chain, BSI is currently working on the standard PAS 221 Prerequisite programmes on food safety for food retailing. This is designed to help retailers in the food supply chain guard against potential food hazards by adopting high standards in food management and hygiene. It will specify a number of areas where effective communication and program management can mitigate the risk of unsafe food in the food chain reaching the final consumer, at what is effectively that end of the food chain.
Due to be published in February 2011, it is expected the standard will specify requirements for amongst other things the construction and layout of food related retail areas and other premises where pre-packed and non-pre-packed food is sold, purchasing management, storage management, avoiding cross contamination, procedures to follow for effective cleaning, employee and sales process hygiene, product information and consumer awareness.
All these factors can affect the risk of a food safety issue damaging a food business's hard-won reputation. As with other industries, adopting a suitable standard and effective management can help ensure a supply chain problem does not escalate into a crisis.
For further information on supply chain compliance management solutions and Entropy® Software.
For further information on supply chain management standards and publications.
[1] http://www.fairtrade.org.uk/press_office/press_releases_and_statements/may_2010/consumers_purchase_more_fairtrade_products_than_ever_before.aspx
[2] http://www.bsigroup.com/en/About-BSI/News-Room/BSI-News-Content/Disciplines/Risk-Management/Primark-choses-Entropy-Software/
[3] http://events.bsigroup.co.uk/News/index.xalter
Business Standards © 2010. Editorial produced by Caspian Publishing in association with The British Standards Institution. Editorial opinions expressed on are not necessarily those of BSI Group or Caspian Publishing. Neither Caspian Publishing nor BSI Group accept responsibility for advertising or editorial content, nor for that appearing on linked third-party websites. Reproduction in whole or in part is forbidden without written permission from BSI Group or Caspian Publishing.
BSI is planning an informal free lunchtime roundtable in central London on 10 December 2009 to explore how small businesses and their trade bodies can work more effectively with standards. Places are limited so to register your interest or request more information, please email bsi.survey@bsigroup.com or call +44 (0)20 8996 7750.
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