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ANALYSIS What can internet retailers learn from the horsemeat scandal?

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by Craig Sears-Black

The horsemeat scandal continues unabated, however it isn’t just unscrupulous traders and suppliers that the food industry needs to eradicate. The issue is a greater one of sourcing and traceability, and can be applied to just about any sector involving the movement of physical goods.

This is accentuated as products move across more international boundaries in the supply chain – a particular characteristic of online retail. Goods bought over the internet need just as many quality checks before they end up in the hands of the consumer.

The retail fashion industry is a good example of an industry that has a truly international supply chain and is seeing more goods traded online. Products are sourced from multiple countries across the globe as retailers build mixed-sourcing strategies. These combine low cost manufacturing in the likes of China and South East Asia with more responsive but relatively expensive near-sourcing locations such as Turkey and Eastern Europe. For fashion brands and retailers, quality checks throughout the supply chain are just as vital.

Quality assurance

Supply chains are constantly getting longer and more difficult to manage as retailers balance cost and quality. The key to success is having accurate, actionable data across the supply chain that can be shared and accessed by producers, transport service providers, distributors and retailers. It’s important to put in place a combination of efficient processes, quality assurance and supporting checks that will help detect any problems with products or components right away.

Across all industry sectors, products should not be shipped until sufficient testing has been done and every stage in the supply chain should include testing of products, not just at either end.

Control and visibility

The technology does exist to allow companies to have complete control and visibility across the entire supply chain. It is critical that all supply chain participants have the ability to update their partners and the retailer itself on the movement of goods through the supply chain.

Tracking through the entirety of the supply chain helps maintain traceability of goods and which parties have handled them, even when the original batch is split. The other element is having effective processes in place to help retailers and their suppliers comply with the relevant industry and quality assurance standards.

All manufacturers use elements of quality control and some elements of traceability, but end-to-end visibility of the supply chain and the checking processes that are needed are too uncommon. The situation that has developed on the horsemeat scandal could well have been avoided if the right processes and checking functions were integrated throughout the whole supply chain.

Management mentality

It’s important for retailers to have a proactive strategy to root out problems. A record should be kept of all suppliers that scores them on their performance. This will help to avoid potential problems by empirically identifying sub-standard or non-compliant suppliers.

Once the necessary level of visibility is there, it’s all down to how well your suppliers comply with your own requirements as well as industry regulations and quality standards. Retailers across all sectors tend to focus on the tier-1 level, but the horsemeat scandal has brought into focus the equally important requirement to manage every step of the supply chain.

Brand damage

It is undeniable that this meat scandal has caused huge amounts of brand damage to the companies most embroiled in it. Customers are angry that what they’re buying isn’t what it was labelled as, and it could also be dangerous. In the fashion industry, brand image is tarnished – or worse – by poor quality products, unacceptable labour practices and bad customer service.

Fashion brands and retailers also need to ensure that the products sent out to customers are perfect and well sourced, in order to minimise the number of returns, which are costly to the business, as well as to protect the brand integrity of the business.

While the meat industry is in the spotlight at present, the issues that have caused this scandal could apply to a number of industries from online fashion to electronics. Other industries must ensure that they protect themselves from falling prey to the same problems.

Craig Sears-Black is UK managing director of Manhattan Associates.

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