3 procurement risks facing professionals now

On the front lineFrom preventing another horsemeat scandal to ensuring supply chain workers are legally employed, procurement is on the front line for safeguarding reputations, business viability and supply continuity

When procurement goes wrong, anywhere in the chain, the consequences can be huge

Significant reputational damage or ultimate business failure become possibilities beyond the pain of supply interruption

Risk 1 – not digging deep enough

• Supply chain risks are a chief concern for 45 % of procurement professionals

• Financial risk 'the tip of an iceberg‘ (Nick Ford)• Less easy to uncover risks that come within supply chain and

CSR e.g. o Political change, climate change, management changes

• Onus is on procurement professionals to consider all scenarios • Dig deep to find facts and prepare for eventualities

CSR: yes or no?

• From horsemeat in beef products to conflict minerals in Smartphones, controversially sourced supplies = crisis management

• Demands for companies to be transparent, responsible and accountable have increased exponentially

• More expectation on companies to give details on sourcing and labour across the supply chain

Leading by example• Apple has confirmed it is

now auditing all its suppliers

• The move to audit all of its 242 smelters, where risk of conflict minerals was highest, shows that Apple is now creating, in its words:

• ‘One of the strictest supplier codes of conduct in the industry'

• Evidence to show that the labour in your supply chain is legal is essential

• Producer PureCircle was hit by a customs ban in the US after claims that its artificial sweetener is produced using convict labour

• Despite the business saying these are false allegations, the US Customs and Border Protection seized all shipments of PureCircle stevia extracts and derivatives upon entering the country

• Importers of detained shipments are given a three-month window to demonstrate the merchandise is not produced with forced labour

Risk 2 – Not complying with Modern slavery act

Over 12,000 UK companies with a turnover of £36m or more are now required to comply with the Modern Slavery Act

They have to show the steps they’re taking to ensure there is no slavery and trafficking in their supply chains

The requirements• These companies

must post a statement on their website homepage

• Early 2016 analysis showed that most modern slavery statements were not compliant at that point

Modern Slavery Act advice• Simon McCarthy in

Supply Management:

• “Get proper legal advice first, rather than immediately turning to third party auditing or platform solutions”

• “Prioritise the supply chain. Address those products and services likely to have low skilled or semi-skilled workers”

• Make a plan

• “Don’t assume this is solely a developing world problem”

Risk 3 - Ignoring climate change• Not all procurement

professionals may factor climate change into their planning, but many argue that they should

• PWC report claims climate change can amplify or alter existing risks e.g. availability of raw materials, energy supply, transport disruption

• The resulting shocks on the global supply chain can be severe and persistent

Reach out• Procurement teams

need to reach out to suppliers to understand what they're doing

• And recognise any climate change risks that may place their organisation and supply chain at greater risk than they realise

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