A recent article in the Guardian shows how uncontrollable supply chains can be. Managing tier 2 suppliers, in this case, became problematic when supermarkets found that the beef they were selling was not what they thought it was…..
Several supermarkets in the UK announced that what they thought was beef in the food they were selling to consumers, was in fact……horsemeat. The most recent supermarket chain to announce this was Aldi, who confirms it has withdrawn beef products that contained up to 100% horsemeat.Aldi said it felt “angry and let down” by its French supplier Comigel after tests on Today’s Special frozen beef lasagne and Today’s Special frozen spaghetti bolognese found they contained between 30% and 100% horsemeat.
Comigel, which also produced the contaminated Findus beef lasagnes, has blamed its suppliers. A representative said he believed his company was buying French beef from a company called Spanghero but it had since told him it had come from Romania.
The story, while certainly unusual, points to the challenges that many companies face as they seek to track and manage their supply chains. Several executives I’ve spoken with over the last few weeks admit candidly that tracking performance and measuring quality for suppliers beyond the first tier is exceedingly problematic. For example, a large global electronics company noted that while they were able to drive quality assurance standards down into the tier 1 suppliers, driving these same standards to subcomponent suppliers was almost impossible. In such cases, problems with electronics may inevitably be traced to these tier 2 suppliers.
Leading edge companies recognize that this is a challenge, and are building supply market risk and intelligence systems that allow them to understand these risks, and embed this knowledge into their systems. The best place to start is to hold tier 1 suppliers directly responsible for tier 2 performance. After all, that is why you pay them! But as you work with your tier 1’s more closely through a longer-term relationship, you are able to identify issues and load them into a risk management system. When an event occurs, the system should be able to track all the people and supplier nodes impacted. As these issues are identified and worked through by a response team, collaboration between the team and tier 1 suppliers should be managed and captured into the system. Most importantly, if another event occurs, the system can immediately identify who will be impacted, and the team can pull up which tier 2 suppliers they need to work with immediately, as well as what their issues are. And the best companies are also making this a system that tier 1 suppliers are not only encouraged to use to manage their supply base, but to share through a federated Wiki with the buyer to provide complete transparency into the supply chain.
So you might get early warning that your spaghetti bolognese is in fact…..err…nevermind…pass the parmesan…