The food manufacturing industry has always been a highly competitive and risk-riddled industry. In a race to maintain productivity, reduce costs, and remain competitive, ensuring supply chain resilience is paramount. A crucial element of this resilience lies in effectively managing risks within third-party supplier relationships. Here we’ll explore practical approaches for monitoring supplier practices, the importance of ethics and compliance training, and the key risk indicators to watch for, aligning with recent regulatory guidance from around the world.
Most food manufacturing industry professionals understand that effective monitoring of third-party suppliers in the supply chain is essential for ensuring compliance with regulatory standards and for mitigating risks. But it requires a combination of thorough onboarding, continuous oversight, and proactive communication to ensure that all parties are aligned with the manufacturer’s standards and objectives.
For food manufacturers, this starts with robust due diligence on third-party suppliers, which typically includes background checks, financial assessments, and the verification of certifications. However, in the food industry, additional checks are necessary—such as ensuring compliance with food safety regulations, environmental standards, and ethical labor practices. By examining a supplier’s past performance and compliance track record, manufacturers can avoid potential disruptions later on.
Once suppliers are onboarded, continuous oversight is critical. This may include regular audits, site visits, and performance reviews to verify adherence to safety standards, hygiene protocols, and food quality controls. Audits should focus on non-compliance with food safety regulations, labor laws, and environmental sustainability practices. Food manufacturers may also benefit from using automated tools to monitor real-time compliance data, enabling the identification of potential issues early on.
Establishing comprehensive contracts with third-party suppliers is another vital aspect. Contracts should outline clear expectations for food safety, ethical behavior, and regulatory compliance, as well as quality control measures. These contracts should be periodically revisited to reflect changes in regulatory requirements and best practices.
The role of ethics and compliance training
Ethics and compliance (E&C) training is a key element in fostering alignment between food manufacturers and their third-party suppliers. In the complex food supply chain, it is essential that all parties share a common understanding of the manufacturer's values, ethics, and regulatory obligations. A well-designed training program can not only help prevent misconduct but also equip suppliers with the knowledge needed to identify and address their own compliance risks.
In a lot of cases, companies are still relying on PowerPoint decks with a signature line for supplier attestations, which is not optimal, or in the event of a visit from a regulator, a true risk mitigation effort. Instead, food manufacturers should be developing their own training programs tailored to the specific roles and risk profiles of their suppliers. An example could be where a supplier is handling raw materials or involved in food processing, they would receive training on food safety protocols and regulatory compliance related to food hygiene and quality control.
For suppliers operating in high-risk regions, especially where forced labor is prevalent, specialized training programs should align with global due diligence standards such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). This training should focus on identifying red flags like wage withholding, excessive overtime, or unsafe working conditions. Suppliers involved in recruitment or labor management should also be trained on ethical hiring practices and labor rights to ensure they adhere to the highest standards.
A targeted training approach not only raises awareness but also involves suppliers in the due diligence process, equipping them to recognize and report risks within their operations. Importantly, this training should not be a one-time event, continuous learning through refresher courses helps to reinforce ethical guidelines and regulatory updates, ensuring all parties remain vigilant.
Key risk indicators when monitoring third-party suppliers
Monitoring third-party suppliers involves tracking key risk indicators to ensure compliance and detect potential issues early. For food manufacturers, this includes regular assessments of suppliers’ food safety records, labor law compliance, and environmental practices.
One of the most critical areas to monitor is food safety. Quality control failures, such as contamination risks, can have serious downstream effects on product integrity and customer trust. Food manufacturers should regularly review metrics such as defect rates, non-conformance reports, and customer complaints to gauge a supplier’s performance.
Environmental compliance is another key indicator. Non-compliance with environmental regulations, such as improper waste disposal or resource use, can expose food manufacturers to fines and reputational damage. By monitoring supplier adherence to environmental standards, food manufacturers can reduce their exposure to these risks.
Labor practices also require careful attention, particularly in regions where modern slavery or child labor may be a concern. Suppliers should be evaluated for compliance with ethical labor standards, including working hours, wages, and working conditions. Implementing periodic site visits and engaging with workers can help food manufacturers ensure that labor laws are upheld throughout the supply chain.
Strengthening the compliance partnership
The U.S. Department of Justice (DOJ) emphasizes the importance of fostering a compliance-driven culture, not only within a company but also with its external partners. For food manufacturers, this means promoting similar ethics and compliance standards for third-party suppliers as those expected of internal employees.
Encouraging third-party suppliers to participate in customized compliance training helps to create a unified alignment between the manufacturer and its partners. Suppliers should be required to certify their understanding and commitment to these ethical standards. A formal certification process not only ensures accountability but also enables food manufacturers to track compliance across their supply chains.
By continuously monitoring these key risk indicators and maintaining an open dialogue with suppliers, food manufacturers can strengthen their supplier relationships and mitigate risks that could disrupt the supply chain. Regular audits, data tracking, and proactive communication provide a foundation for maintaining long-term compliance and operational success.
In today’s fast-evolving regulatory landscape, food manufacturers must prioritize risk mitigation and compliance within their supply chains. Through targeted monitoring of third-party suppliers, tailored ethics and compliance training, and vigilant oversight of key risk indicators, food manufacturers can build a resilient supply chain that not only protects their business interests but also aligns with global regulatory standards.
By integrating these strategies, food manufacturers can enhance their supply chain’s ability to withstand disruptions, meet growing compliance demands, and maintain a strong ethical foundation, which should ensure continued success in an increasingly complex market.
