Food trust snapshot: Supplier risk

Supplier risk management

The horse meat substitution scandal is just one example of what can go
wrong when companies fail to properly manage supplier risk.
Today, supply chains typically include
multiple partners, with services and sourcing
Complex arrangements realise new risks
managed across several organisations and in The extent and complexity of recent sourcing Information security and privacy. The risk
jurisdictions across the world. and outsourcing arrangements has increased that sensitive data, including customer data,
Corporates are increasing their use of the likelihood of supplier risks. Some of is compromised by a cyber-security breach or
third-party suppliers in the execution of these risks may include: failure in a supplier company.
key strategic imperatives. In many cases, Reputational risk. The risk to your Regulatory risk. The risk of non-compliance
these sourcing and offshoring activities are organisations reputation due to a service with the regulatory requirements or the
becoming more extensive and sophisticated or supply interruption, a supplier safety commercial undertakings associated
in order to capture the next level of service or quality failure, or a suppliers business with sourcing, outsourcing or offshoring
delivery, processing efficiency and cost practices for example, an overseas arrangements in the jurisdictions you
savings. supplier with substandard employment operate.
arrangements. Commercial risk. The risk of financial
Yet, unless your supplier risk management Resilience risk. The risk that a supplier loss or cost overruns from poorly managed
framework has also evolved, you could face failure results in an interruption to sourcing arrangements or supplier failures
unexpected risks and not capitalise on the customer service sometimes immediately. and inaccurate billing from outsourced
potential benefits. For example, an IT failure that prevents parties.
customers from placing orders or interacting Regardless of the supply, sourcing or
with your business online. outsourcing arrangements can involve
multiple supplier relationships that are not
visible to the end-client.

Possible supply chain risks

l
hica al
Child labour Resource a l etnment Fi n Exchange rates Accuracy of billing
i an
Ethical practices consumption oc viro c (volatility) Commercial
n
& S

Health and safety Waste Raw material prices Competition

ia
e

Energy prices Labour costs

Complex Penalties
arrangements
Ope ra t io
a te g i c

realise
Reputation/brand Legal/regulatory Food safety Delivery
Compliance IP/food fraud new risks Demand planning performance and
St r

Macro economic Change programs Quality standards lead times

na

Geopolitical Market changes Logistics Controls

l

Investment Contracts Security

Co n
t inu i t y

Supplier financial failure Poor management

Food security Key dependencies on
Natural hazards personnel/suppliers
Terrorism/food defence
Food trust snapshot: Supplier risk

The best practice Are you managing supplier risk effectively?

response
You need an overall framework that enables
you to manage supplier risk throughout the
sourcing lifecycle.
A supplier risk management framework not
only offers increased levels of control; it can
also help your organisation maximise value
by offering:
A more reliable and consistent process
for managing supplier risk
Competitive differentiation through
a transparent purchasing policy
that supports your corporate social
responsibility guidelines
Increased operational efficiency and
reduced costs through centralised
contract management
An enhanced ability to outsource non-
core activities and partner with strategic
suppliers on key activities
A reduced need to replace failed
suppliers.
The objective is to encourage cost effective
sourcing, while ensuring the risks and
accountability for end-to-end sourcing
and service delivery are clearly defined,
managed, monitored and understood by
both your organisation and your supplier.
Some points to consider
Do you have clear visibility of all stages How are you assured by management
and suppliers in your supply chain? that you are operating within your
Does management routinely require supplier/offshoring/outsourcing risk
appetite?
suppliers to provide details of their own
sourcing/outsourcing and offshoring Are you confident you can respond to
arrangements? any supply chain disruption without
Do you regularly monitor the unacceptable loss?
operational, ethical and financial risk Are you confident that you are not
and performance of your suppliers? being defrauded by employees and/or
How are you assured that your supply suppliers?
chain complies with the relevant Do you receive robust assurance that all
regulatory and legal requirements? key risks are managed in your supply
chain?
Does management take a risk-based
approach to assessing and managing
supply chain risk?
Its not just about playing
defence its also about playing
offense finding competitive
advantage by shaping a supply
chain resilience strategy focused
on disruption avoidance.

Get in touch
Global US
Craig Armitage Bruce Baillie Sally Bernstein Kelvin Harris
Global Leader, Food Supply Alliance Leader, Food Supply US Leader, Food Supply US Director, Food Supply
and Integrity Services and Integrity Services and Integrity Service and Integrity Services
+64 3 374 3052 +64 9 355 8043 +1 617 794 9777 +1 404 944 7218
craig.armitage@nz.pwc.com bruce.baillie@nz.pwc.com sally.bernstein@us.pwc.com kelvin.harris@us.pwc.com

www.pwc.co.nz/foodtrust

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