Mitigating Trader Partner Risk in the Global Food Supply Chain

As the food industry continues its global expansion—at the end of 2012, the global food market was valued at $4.2 trillion dollars and, according to Datamonitor, is expected to reach $5.3 trillion dollars by 2017—so does supply chain, foodborne illness, bioterrorism and brand reputation risks. 

Why? Because a global supply chain, longer and more complex than a domestic supply chain, has multiple vulnerability points with potentially hundreds of variables.

There are numerous import and export regulations in the food industry to decrease risk exposure. The 2011 Food Safety Modernization Act, managed by the U.S. Food and Drug Administration, for example, requires companies to implement a food defense program to prevent foodborne diseases and verify that their foreign suppliers have adequate preventive controls in place to ensure that the food they produce is safe.

Additionally, there are many U.S. and other non-U.S. governmental regulations that companies must follow to trade internationally, one of which is not doing business with a denied party.

Food and beverage shippers are responsible for determining whether any business partners, including individual contacts, parent or subsidiary companies, or customer, have been placed on any official denied persons or illegal transshipper list; blocked from import or export transactions; or sanctioned by a government for illegal acts. Companies must also ensure they do not ship to a country that has been placed under embargo by the country from which they are exporting.

Obeying the law is critical, because non-compliance can not only hold up goods at customs, but can also potentially result in fines, jail time and bad publicity. Additionally, time to market with food products is critical. Delays could cause spoilage or missed opportunities, particularly with seasonal items.

Increasing regulations and focus on mitigating risks, combined with growing supply chain complexity, is driving the need for the food sector to more closely manage these issues. However, companies can face stumbling blocks with compliance. Using manual processes to manage compliance can be error prone and time consuming, as hundreds of country-specific lists and regulations must be checked.  It also requires extensive knowledge of the laws, which are frequently updated. 

As a result, many companies are turning to automation to help them perform this task quickly, compliantly, and at a lower cost than performing the task manually. A cloud-based software can be easily and quickly integrated into existing systems and is readily accessible to all parties involved in the transaction. Benefits of automating restricted party screening include:

1.            Improved screening accuracy. With over 200 lists from governments worldwide, manually determining whether a partner, customer or contact is designated a restricted party is time-consuming, inefficient, and prone to errors.

2.            Prevent illegal transactions and the associated fines and penalties.

3.            Reduced shipment delays. When matches occur, a configurable workflow allows for efficient resolution of holds using routing, alerts and escalations.

4.            Preserves an audit trail of screening activity to reduce corporate risk and demonstrate reasonable care.

5.            Centralized information storage for all partners. Because this information is reused throughout the system in a range of transactions, RPS (restricted party screening) results are automatically added to partner and contact records.

Kraft Foods Group, the world’s second-largest food company, is one company using cloud-based restricted party screening software to simplify its compliance processes, maintain compliance with government organizations, and protect its brand value.

Kraft uses Amber Road’s software in a decentralized fashion by local resources and has integrated it with SAP, with over 200 entities at the company using the system. Previously, the company had been using a manual system for restricted party screening.

With the technology, Kraft has significantly reduced the time needed to screen restricted parties and has reduced its number of false positives, decreasing the time spent on validating potential matches.