When beef goes horse. A lesson in managing supplier risk

The rising cost of food production, coupled with fierce competition in the retail sector, has driven food companies to aggressively seek cost savings and increase the complexity of their food supply chains.

This is the backstory to the 2013 scandal that saw horsemeat passed off as beef mince and supplied to food producers all over Europe – a problem that continues to afflict the food industry today.

The scandal sparked an international investigation, prosecutions and questions over regulator effectiveness. There were allegations of criminal activity and questions about whether European regulators are capable of coping with an industry whose supply chain has become more complex and international. It caused consumers to question whether they can trust the labels on supermarket shelves.

Our client, an international FMCG company, asked us for help in understanding the key economic, social and environmental risks facing its food and commodity supply chains.

This was a focus on mitigating the risks of food fraud as much as it was assessing food safety and quality across the supply chain. So, how did we help and improve their processes?

Increasingly complex and extended supply chains bringing new and expanded risks, such as reduced traceability and fraud, required a new approach to supply chain management. We supported our client by redesigning their strategy, structure and processes to create a robust supplier risk framework.

We also developed a detailed understanding of retailers’ requirements so our client could focus on the key drivers that were pertinent to their relationships.

This is an industry where customer trust and confidence is paramount, and a food safety scare can soon become a high profile and brand damaging scandal threatening a food company’s reputation and viability.

Successful food companies must demonstrate transparency and reliability by understanding their customers’ requirements and effectively manage their supply chain risks to reduce their exposure.

 

 

How did we help?

We developed a range of options for our client, which included:

  • Risk profiling to identify and quantify risk in their supply chain
  • Forensic investigations to identify what may have gone wrong and why
  • Performing controls and supplier audits and due diligence work to provide assurance as required
  • Deploying risk monitoring solutions to ensure compliance with standards
  • Redesigning the supply chain structure, strategy and organisation to optimise between cost and resilience.

Contact us

Craig Armitage

Managing Partner, PwC New Zealand

Tel: +64 21 616 232

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