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August 29, 2014
Integrity of UK Supply Chains Threatened by Complacency
    by Robert Kropp

The Chartered Institute of Purchasing and Supply finds that only eleven percent of UK-based supply chain professionals say they have visibility throughout their entire corporate supply chains.


Published quarterly, the CIPS Risk Index assesses 132 countries, which together account for over 90% of global economic activity. Its publisher, the Chartered Institute of Purchasing and Supply (CIPS), is a trade association representing supply chain professionals.

Overall, the most recent Index finds that global supply chain risk decreased during the second quarter of 2014, attaining the lowest level of risk in 18 months, largely because of improved economic activity. “The economic recovery in Europe, which is admittedly slow, coupled with lower bankruptcy levels in Europe, is good news for UK supply chains which are heavily reliant on Europe in general and Germany specifically,” CIPS economist John Glen said.

However, even if one were to focus strictly on corporate supply chains as they relate to economic activity, the outlook for the near future is problematic. For example, “On top of the mounting human cost of the Ebola outbreak in West Africa, Q3 could see the region become isolated from world trade,” CIPS stated. Furthermore, the Arab-Israeli conflict, the evacuation of workers from Kurdish Iraq, and the increasing isolation of Russia on account of its military activities in the Ukraine could all contribute to increased supply chain risk during the third quarter.

Of course, sustainable investors have been analyzing corporate supply chain performance through a much wider lens than the merely financial for decades. Extending corporate responsibility for supply chain performance into the realm of social and environmental justice, sustainable investors have made significant strides in pressuring corporations into improving the lot of workers in developing nations. They have done much to make corporations accountable for the environmental effects on communities as well.

Viewed through the lens of social and environmental justice, the CIPS Index includes findings that are more troubling than its conclusions about financial performance. Even as a Parliament committee is considering a Modern Slavery Bill for the UK, CIPS found that “11% of business leaders that have a supply chain think it is likely that modern slavery is already playing a role in their supply chains.” Furthermore, “only 21% of supply chain professionals say that they are able to guarantee there is no malpractice in their supply chains.”

Following a 2013 scandal in which meat labeled as beef was found to have significant percentages of horse meat included in it, one might think that companies and consumers alike would be adamant in demanding that verification of supply chain integrity be prioritized. However, CIPS concluded, this is not the case. “Almost three quarters (72%) of British supply chain professionals say they have zero visibility of their supply chains beyond the second tier with only 11% saying they have visibility along the entire chain,” the organization found.

Also, “This complacency is mirrored amongst consumers who rarely consider how products are sourced with 30% taking the country of origin into account when buying consumer goods and only 25% caring about how their products are sourced.”

“Britain’s horsemeat scandal and the Rana Plaza factory collapse in Bangladesh demonstrate that there are still major dangers, particularly over the lack of visibility, oversight and control from businesses of their suppliers,” CIPS CEO David Noble wrote in The Guardian recently. “Indeed the length and complexity of supply chains mean underlying issues remain unknown and are invisible to buyers.”

“Businesses and economies must consider the complexity and vital role played by supply chains worldwide and make appropriate provisions before it is too late,” Noble wrote.

The Index published by CIPS was developed by Dun & Bradstreet.

 

 
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