Keeping It Clean

Supply-chain accountability is a hot topic throughout the world today. Many corporates include sustainability and ethics sections as part of their annual reports, either because they are required to by regulators or because it’s what shareholders want. From conflict minerals to slave labour, there’s enough pressure on electronics manufacturers, for example, to ensure suppliers live up to their own business values.

Here in South Africa, JSE-listed companies must publish reports in line with the King IV guidelines, which emphasise the importance of accountability throughout the entire supply chain. Traditionally, people have always looked to auditors to unearth any kind of wrongdoing within supply chains. However, with a number of big international auditing firms embroiled in scandals, trust in these processes has taken
a knock. This has encouraged many companies to investigate technology that can help to monitor and add transparency to their B2B procurement processes.

Schalk van der Merwe is a partner at risk management firm Inoxico. He says that the problem lies in organisations focusing “only on regulating and monitoring processes around their interactions with supplier companies” with which they come face to face. In effect, they are forgetting that the supply chain goes deeper than that.

Boosting monitoring and increasing transparency

Van der Merwe believes that before companies even start thinking about other services through which monitoring and transparency can be achieved, they need to look into their own processes. “After all, if organisations can understand which suppliers to avoid in the first place,” he says, “they will most likely avoid many of the supply-chain problems they face around corruption and/or poor service delivery.”

“One of the most proactive ways to go about this is to ensure that the supplier application process caters for effective master data and risk management,” advises Van der Merwe, “with the necessary delegation of authority built into a system that facilitates the process.” This makes sure that companies that do not meet a certain accountability benchmark never make it into the supply chain in the first place. He adds that monitoring and vetting should be ongoing processes to ensure that all suppliers always stay above the benchmark.

However, the system suggested by Van der Merwe requires that companies collect a lot of data and, more importantly, that this data is verifiable and up to date. Many companies may not have the capacity to run this process efficiently and may not even be aware that there are processes and solutions that can help. It is clear that if an organisation wants to run an accountable supply-chain system, it must start by looking at its own internal processes. With the right processes implemented, it may be hard for dubious suppliers to be part of the system in the first place.