The Impact of the Elliot Review on Procurement

Milan Panchmatia, Director at 4C Associates, looks at how the Elliot Review could affect the food and drink industry in the future.

Despite having been made public almost two years ago, the horse meat scandal continues to affect the food and drink industry. The discovery of horse meat in certain products provoked much public anger and shed a light on some of the illegal practices taking place across Europe’s meat supply chains. The subsequent investigation led to the publication of the Elliot Review, an independent report into the food and drink industry, which lays out a number of recommendations.

In an attempt to understand the potential impact of the Review, a survey was issued to the members of Food and Drink Industry Procurement Forum and 634 CPOs, Heads of Procurement, Purchasing Directors, CFOs and other C-level procurement professionals. Their responses, alongside a series of insights gathered from interviews and roundtables, have been collated below.

The Elliot Review’s recommendations

When the horse meat scandal erupted, many were quick to attribute the blame to Europe’s large supermarket chains. The intense competition between these retail giants had resulted in a huge increase in the cost pressure on their suppliers. This was identified as the main reason horse meat found its way into the supply chain. A situation that was not helped by the general lack of transparency within the sector.

The Elliot Review was commissioned by the UK government in an attempt to identify the weaknesses in the current system and suggest a number of recommendations to ensure a similar situation would not occur.

In terms of recommendations, the Review called for the creation of an independent food crime unit, which would sit within the Food Standards Agency. Other measures include an increase in unannounced audit checks, the development of a whistle blowing system, improved food testing and the development of a culture within the industry of questioning the source of products. Each of the above recommendations has been accepted by the government, making it clear is that the Review will affect the entirety of the food and drink sector.

Impact on food and drink procurement and supply

Asked which areas of their businesses would stand up to the recommendations of the Elliot Review, approximately one-third  of survey respondents highlighted company policies as an area where they could ensure product and supply integrity. It is clear that complying with additional regulations will undoubtedly result in a number of policy changes for businesses throughout the food and drink supply chain. This is particularly true in light of the Review’s focus on the relationship between supermarkets and suppliers.

The Elliot Review states that any retailer which consistently buys a specific good for less than market price must ensure there is a paper trail throughout the supply chain. In addition, the retailer must be able to prove that the supply chain has been audited and there is no reason to suspect the goods do not meet legal requirements or play a role in a criminal network. Supermarkets which fail to do so, may be found guilty of complicity in crime.

In this context, close to one-fifth of respondents singled out controls, systems and operating practices as three areas where they could currently ensure supply chain integrity. One issue which was flagged in relation to stricter regulations and controls, is the gap that exists between the North and South of Europe. Many members of the Forum felt that suppliers based in the south are unable to provide the level of detail regarding their sourcing practices which the Elliot Review will require. This disparity could well impact the effectiveness of the new controls.

Tighter controls? Who pays?

There were also some concerns regarding who would shoulder the responsibility for the extra controls. Several Forum members commented that supermarkets were unlikely to lower the cost pressure on suppliers and could simply demand that they fulfil an additional set of regulations. A situation which would intensify a level of cost pressure which the Elliot Review has already defined as “unsustainable.”

It seems that many procurement professionals remain sceptical of the impact of the Elliot Review, in particular in relation to altering the behaviour of the large supermarket chains. Although the Elliot Review highlights the latter as a key factor behind the horse meat scandal it is unlikely that their current approach will change overnight. The UK’s supermarkets operate in one of the globe’s most competitive areas, a situation which makes even gradual changes difficult to implement.

Not just meat procurement

In conclusion, the food and drink sector is the UK’s largest manufacturing industry and as such the government is not willing to take any chances in relation to the credibility of its supply chains. The Elliot Review will affect businesses across the entirety of the sector, making it mandatory reading for anyone working in food and drink procurement and supply.

The cynicism expressed by many professionals in terms of just how quickly the recommendations will be applied, should not cause businesses to overlook its impact. The government has voiced its support for each of the points highlighted by Professor Chris Elliott and has confirmed their future implementation.

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