7 risks in the food supply chain

SAI Global

Friday, 05 July, 2019



7 risks in the food supply chain

A white paper from food safety certification and training organisation SAI Global has highlighted that safety failures at certain points in the food supply chain, including contaminated foods, adulterated ingredients and the presence of unlabelled allergens, can have serious, potentially life-threatening consequences. The organisation says that more needs to be done to ensure customer safety by assessing and addressing risks across the entire supply chain.

SAI Global has audited thousands of food manufacturers to ensure they meet legislative requirements in the country of sale and manufacture, and comply with global food safety standards. The auditing process has revealed common mistakes that businesses are making when purchasing ingredients, and when storing, processing, packaging, distributing and handling food.

Despite the food industry’s focus on customer awareness and developments in food processing and technology, food scandals continue to occur. In 2017, SAI Global found that 47% of consumers were less trusting of a business involved in a major food incident.

Kimberly Carey Coffin, Global Head of Food, Retail and Hospitality at SAI Global, said, “The ever-increasing complexity of the food supply chain translates to ever-increasing levels of risk, challenging an organisation’s ability to satisfy its customers in terms of quality, safety, integrity and continuity. As an industry, we are particularly vulnerable when it comes to risks that can occur deep within those chains — like intentional and inadvertent adulteration, substitution, product mislabelling and cross-contamination with both naturally occurring and foreign materials.”

Coffin is urging food businesses to thoroughly investigate their food supply chain to identify and mitigate any known risks. “Many of the faults that occur in the food supply chain are often the result of an organisation lacking adequate resources to mitigate risks, not understanding the importance of formally monitoring suppliers or having poor supplier relationships, to name a few,” she said.

“Ever-changing consumer demands are also putting pressure on the need to demonstrate integrity of products, as well as on the continuity of supply. Now, more than ever, food businesses must impose strict assessment practices in food production, manufacturing and other stages of supply chain management to ensure customer safety is a primary focus.”

Seven risks in the supply chain

SAI Global has identified seven risks that could compromise the integrity of the food industry supply chain, and hence customer safety:

1. Fierce competition placing downward pressure on supply costs

Due to continual downward pressure on supply costs, food businesses are often forced to source from further afield, often opting to go global. As a result, the chance of risk events occurring deeper in the supply chain increases, putting pressure on manufacturers to rethink their controls.

2. Most companies are only monitoring their first- and second-tier suppliers

A recent study by SAI Global revealed that many food businesses are only looking at their first-, and perhaps second-, tier suppliers — rather than digging deeper into their supply chains. This is a significant source of risk.

3. Most companies manage their suppliers through contractual arrangements, rather than more formal monitoring

A reliance on contractual arrangements places the onus on suppliers to manage their own supply chain. As a result, any risks or liabilities lie with the supplier; however, this does not eliminate the risk to the ultimate food manufacturer. As suppliers may not be as closely aligned with the customer, more formal monitoring of subcontractors or second- and third-tier suppliers is required to assess risks to product integrity.

4. Many companies source raw materials through brokers and agents, resulting in loss of supplier relationships

Any food business that sources raw materials through brokers and agents — who can source from anywhere — risks losing control of supplier relationships. Therefore, companies need to get to know their indirect suppliers. Although this involves investing time and money, it enables more effective targeting and increases knowledge of a product’s source of origin.

5. Ever-changing consumer demands placing pressure on continuity of supply

Consumers are no longer just looking for a source of ‘fuel’ in the food they eat. They are much better informed about the impact of diet, with food choices often guided by specific dietary requirements or the latest food trend. Given the need to cater to more diverse consumer preferences, there is added pressure on businesses to provide more information to consumers such as ingredient origin, nutritional information and allergens.

6. Food brands have inadequate resources for mitigating risks

To mitigate risks, food businesses need to make supplier diversity management a primary focus. For instance, they need to move from the ‘preferred supplier’ model to a ‘multi-supplier’ relationship model. Although this takes the organisation to unfamiliar areas of the globe, it increases focus on building holistic supplier relationships of trust and transparency.

7. The growth of private labels

There is an obvious financial incentive for retailers to sell private label products, as this allows them to maintain an identity in a price-competitive market. However, most retailers do not have manufacturing infrastructure and rely on suppliers to assess, interpret and manage risk. Again, this ties a food retailer’s brand equity to its suppliers, emphasising the need to manage downstream risk.

SAI Global is available to provide risk assessments to companies operating in the food industry. For more information, click here.

Image credit: ©stock.adobe.com/au/Ekaterina Pokrovsky

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