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The Effects of Not Observing Due Diligence in Your Supply Chain

Supply chain means the movement and flow of materials from the original source to its end consumers. Supply chain includes manufacturing, transportation, purchasing, warehousing, demand planning, supply management and supply planning. The supply chain is composed of people, information, activities and the resources involved for the movement of product from the original supplier to the customer. If a company fails to exercise diligence regarding their supply chain, some level of failure in operation will surely be expected. But if on the other hand, supply chain management is implemented the business or company will have smooth operation.

The supply chain is a vital part in any business because it is considered to be an effective determinant of success. A company must possess effective supply chain management in order to deal with their supply challenges and problems. Supply chain management is the administration of unified businesses that is involved in provision of services and product packages needed by the end consumers in the supply chain. The supply chain management spans the entire storage and movement of the raw materials, inventory for work in process and the finished goods starting from the origin point up to the final consumption point.

But despite the value and contribution of a solid supply chain, there are still companies that fail to understand and appreciate the real value and integrity of their supply chain. Many of today’s companies are reluctant to invest much time and energy into ensuring they do not have any improper and unethical activities. Results of surveys indicates that a high percentage of companies fail to observe due diligence and almost all of these companies admit that they have not even conducted checks what so ever.

When a company fails to observe due diligence and safety checks within their supply chain, it may result in several problems like contamination of products which can significantly impact the quality. Other negative effects can be brought by the companies’ failure to understand the real value of supply chain and supply chain management. The only way to avoid this is to observe full awareness and proper practices to avoid more damaging effects to the company.

In the event supply chain issues in your company reach its worst stage, your company will not just suffer problems on supplies and products but there is also the possibility that it will face several fines and charges. There is specific legislation requiring companies to demonstrate adequate and ideal procedure in addressing risks. The worst case scenario is that the executives or top leaders of the company may be sent to jail for failure to observe due diligence which may result in serious damage to people.

To avoid these effects, a company must make sure that they have the knowledge and full awareness on what the supply chain is about and its significant function to business. It is also advisable to create and organize teams that will monitor and ensure that the company is still following the proper practices for managing their supply chain in order to avoid several problems connected with the failure of observing due diligence regarding their supply chain. 

March 12, 2013
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BY Bellwether
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