Poor sustainability practices, compliance failures, reputational challenges and supply chain delays are among the third-party risks that put CPG companies at a disadvantage when it comes to the overall integrity of their TPRM and supplier programs.
CPG and retail organizations need visibility into all of their vendors and supply chains to help proactively identify potential risks and mitigate the effects if they do occur. TPRM software solutions can provide capabilities to assist, including monitoring, auditing, identifying critical issues, and taking corrective actions.
In this blog post we’ll explore some of the top third-party risk management challenges facing this industry, and how these capabilities can help manage them.
CPG operations are complex, often relying on suppliers and third parties to fulfill manufacturing, distribution, and promotional needs. In most cases, these suppliers have their own suppliers- fourth and nth parties. Even though they may not have a direct engagement with these nth parties, CPG organizations are still accountable for their activities, practices, and compliance, and can experience disruptions and brand damage due to unethical or unsustainable practices.
Due to this level of complexity, there are risks that may not be readily available. These risks can include:
These types of incidents are growing. According to a SecurityScorecard report, 50% of organizations have had indirect relationships with at least 200 breached fourth-party vendors in the last two years.
This increases potential liability, stress, and potential delays in bringing products to market. CPG organizations need to be able to see down and across their entire supply chain to properly manage and wrap their arms around these potential operational, compliance, and reputational risks.
Aravo’s platform provides necessary visibility into a CPG organization’s entire extended enterprise. This does not just include direct third parties, but also fourth parties, and even nth parties further down the supply chain to ensure they are not engaging in unethical, unsustainable practices within their operations.
Due to the nature of the business, there are often physical supply chain components that CPG companies are reliant on. In many cases, utilizing a third party is more cost effective than managing tasks internally. These can include shipping and distributing products, access to raw materials or components, partnerships with retail stores, and more.
Due to dependence on vendors to help complete these tasks, there are logistical risks at play, as well. Risks related to labor shortages, just-in-time component strategies, concentration risks, and factors leading to shipping delays all can cause disruptions to the quality and delivery of products to market.
One major example of how components shortages affected global product operations and delivery is the semiconductor shortage that began during the COVID pandemic. This heavily affected the automotive industry, who were unable to bring products to market due to these shortages.
Overconcentration and sole-source suppliers lead to a multitude of risks including labor and components shortages, quality risks, delays due to geopolitical and economic factors, and more.
Automated TPRM software providers help organizations identify and manage over-concentration due to a single supplier or geographical area. Factors that assist with this include tracking and visibility capabilities, risk intelligence, and workflows designed to help diversify supply chains to avoid over concentration.
Ensuring product quality and timely deliverables is critical to CPG’s ability to deliver products to its customers, uphold ethical practices and brand value, and meet global compliance requirements.
TPRM solution providers like Aravo help organizations implement performance management measures into their TPRM programs, allowing them to monitor and ensure their third parties can deliver within defined contractual and SLA criteria within their processes.
CPG businesses may source materials from vendors all over the world, from familiar and long-term providers to small shops to multinational conglomerates. When working across a network of suppliers, agents, shipping and transportation providers, there are going to be situations where bribery, corruption, fraud, conflicts of interest, and unethical or unsustainable practices can occur.
In addition to regulator expectations, consumers seek to purchase from CPG companies that uphold ethical behaviors and standards.
CPG companies have to be particularly diligent in defining ethical behaviors and practices across their supplier networks to reduce the practices that are harmful to the environment, communities, employees, and financial activities. Any third-party disruptions due to fraudulent or unethical behavior threatens their ability to deliver to customers as well as their reputations, government and stakeholder scrutiny, market evaluations, and operational performance.
TPRM doesn’t stop at onboarding, CPG organizations need to ensure that their suppliers continue to perform as needed in order to effectively deliver products to the market and consumers.
Risk management doesn’t stop with scoping and onboarding a new vendor. Continuous monitoring is a critical component to managing these relationships and helps CPG organizations keep track of events, risk activities, and scores that don’t meet thresholds and controls.
Visibility into your third-party networks is the first step to wrapping your arms around the complex risks facing this industry. TPRM software providers like Aravo are here to help.
Aravo is unique in that we work with our customers to prioritize their TPRM maturity journey and build a roadmap towards making customized improvements. Our Strategic Alignment Framework™ is designed to provide CPG and other industry organizations with an adaptive, best-practice methodology that works to streamline their TPRM program.
With this framework, CPG organizations can build their TPRM program maturity, meet projected outcomes and continue to gain better visibility and control across their entire supply chain.
Learn more about how to manage third-party risks and improve TPRM maturity today!
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