Fighting Supply Chain Fraud Requires Strategy, Commitment
It’s not enough just to manage your own company’s supply chain anymore. With the long arm of regulators gigging companies for problems not only in their own supply chains, but those of their suppliers and their suppliers’ suppliers, big multinational enterprises have become more aware and more active in getting control of what is happening throughout their networks.
- AB Mauri
- Han Kieftenbeld, chief financial officer at bakery technology company AB Mauri.
By embedding best practices, mandating transparency throughout the system, better employing technology and putting in place effective training programs for all levels of employees to make sure rules are followed, fraud is deterred and reputational black eyes that could arise from the use of child or slave labor are avoided, said Han Kieftenbeld, recently named chief financial officer for U.K.-based bakery technology company AB Mauri.
With operations around the world, AB Mauri’s executives and board members have become more aware of the problems that can arise within their supply chain, given the high-profile stories of other companies who have found themselves in the news, said Mr. Kieftenbeld. “It has come to the attention of the C-suite and people are putting more emphasis and programs in place…whether that is through polices being put in place or a supply code of conduct, we are making a statement as a company that these are some of the principles we stand by,” he said.
That has made the company more proactive in how it manages its supply lines, said Mr. Kieftenbeld, who joined AB Mauri in July as CFO, where he is in charge of procurement and supply chain. That involves making sure through the contracting process that suppliers and their subcontractors sign off on their supply-qualification and audit programs, putting more people on the ground to inspect and monitor facilities and shifting the corporate perspective on the importance of these issues. “Historically, supply chain organizations looked at spreading risks by having multiple sourcing options, and this was borne out of creating leverage,” he said. “But the agenda has moved on and companies are doing more now from a risk-management perspective.”
Technology plays a big role. By increasing the use of data and creating a greater level of accountability across the supply chain the company has improved its understanding of its performance at its own facilities and the next level down, Mr. Kieftenbeld said. This forced the company to look at issues from an IT perspective, including cyber-mitigation actions and security protocols. To make sure the right safeguards are in place, contracts clearly spell out what every party’s responsibilities are, thereby increasing awareness of the need for monitoring among employees and contractors to assess outside risks, he said.
Mickey North Rizza, vice president of strategic services at supply chain software and consulting firm BravoSolution Spa, said technology offers a way for companies to keep databases current and to look at the totality of their networks from a compliance perspective. This allows them to qualify vendors and potential partners against key risk issues they have identified, and to better manage and mitigate risks that may arise through their entire supply base. “It gives them intelligence to make the right decisions when they take action,” she said.
AB Mauri supplements these practices by making both announced and surprise audits of its supply chain partners. More important than auditing after the fact, Mr. Kieftenbeld said, it’s vital when qualifying possible partners to make sure “they actually can be compliant with the protocols that you have set out.”
AB Mauri works with supply chain data exchanges such as Sedex and EcoVadis, both based in Europe. These exchanges bring together suppliers and companies focused on improving labor, health and safety, business, ethics and environmental standards. Banding together and sharing best practices creates a higher level of transparency and a greater sense of accountability, he said. “If you want to do business with us, basically it says you have to sign up and make sure you comply with all these aspects,” Mr. Kieftenbeld said. “It covers all the principal parts of what I would consider responsible supply chain.”
A company or brand can be impacted negatively regardless of how much due diligence it conducts on its supplier network, Ms. Rizza said. “Can we be 100% certain? Probably not,” she said. “No matter how much due diligence you do on a supplier there may be a surprise. We’re just trying to mitigate any risk that comes up.”
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