A focus on the supply chain in the food & drink sector

14/12/16 General

Many insurance brokers, as well as being generalists in providing many standard forms of insurance already familiar to clients (e.g. motor and liability insurance) are now developing their expertise in specific industry fields, where their knowledge of that industry can really help their clients to both understand and protect against the risks faced in that industry.

Here we look at the food & drink sector, in particular the supply chain.

Modern supply chains are much more than a means of moving product from one destination to another. For supply chains to work at their best, it is important that everyone in the chain is fully informed and engaged, from the supply of primary ingredients through to delivery of the final product to the customer. The need for traceability has never been higher. With so many steps in the chain, it is important to have to correct insurance cover.

Trends in food and drink (and other sectors) can be quite volatile and to an extent are dictated by the fads of the end customer. This means clients must look both inwardly at their own supply chain and outwardly to their target market. For example, good sales leads can flounder on poor logistics, inadequate supply of primary products, or other factors which can affect the supply chains such as a storm or even a government coup; all eventualities should be risk-managed and considered. Imagine finding you have developed a best-selling recipe that had garnered lots of publicity, but find a key ingredient is stranded on the other side of the world – not only is this a lost sales opportunity, but there is a potential damage to reputation going forward because you cannot deliver.

Inefficient supply chains can also be a massive drain on cash and other resources and can have a serious effect on an SMEs bottom line.

However, the logistics are not the only challenge. There are many toxic risks when it comes to food & drink manufacture and distribution, so it is also important to look at your supply chain from a product liability perspective.

One poor ingredient from somewhere within the supply chain can lead to whole batches of product being contaminated.

Who could forget the scandal faced by supermarkets that had to withdraw their burger ranges over horse meat fears? Tests found equine DNA in some of their products, after it was discovered suppliers from the Netherlands and Spain had added the “extra ingredient” to the meat sent to the Irish processing plant that was part of the supply chain for all the supermarkets concerned. This part of the supply chain was forced to close and the plant sold as a consequence of their actions.

It is not only food & drink manufacturers that have to be aware of their supply chains. Restaurants and retailers also need to make sure they know where the products they are using or selling are coming from. Ultimately restaurants and retailers are responsible for what they sell and where it comes from.

With this responsibility comes risk and the above incidents highlight the need for proper cover in, for example, Product Recall, Directors & Officers Liability, and Public Liability, not to mention reputational damage. We can help you review your own supply chain, to help you fully understand the risks involved and to advise how you can properly protect your business against them.

Sources:
http://www.postonline.co.uk/post/analysis/2449110/ product-liability-food-leaving-a-nasty-taste
http://www.foodanddrink.scot/industry/market-drivensupply-chains-project.aspx

To find out more about insurance for the food & drink industry visit our Food & Drink Insurance page