Understanding the Risks
The recent UK Post Office scandal has thrust Fujitsu into the spotlight, raising concerns about the risks associated with choosing and managing organisations responsible for critical services as strategic suppliers. In this exploration of Fujitsu's involvement in the flawed Horizon IT system, as reported by press including The Guardian, CNN, the BBC, and The Telegraph, we look into the implications for procurement functions when considering Fujitsu or similar suppliers.
Unravelling the UK Post Office Scandal:
Fujitsu, was responsible for developing and maintaining the Horizon IT system, whose technical failures, led to false accusations of financial discrepancies against innocent Postmasters. Key points included:
Postmasters Challenges
The technical glitches within Fujitsu's Horizon system went beyond mere operational hiccups. Postmasters, entrusted with the financial management of local branches, faced false accusations of financial irregularities, damaging both their reputations and leading to severe financial hardships. Some postmasters paid back wrongly identified discrepancies from their own funds, while others faced legal actions. For most falsely accused postmasters, it resulted in financial ruin as they struggled to cope with the aftermath of accusations and legal proceedings.
Lack of Accountability
Media coverage highlighted the challenges faced by postmasters and raised concerns about Fujitsu's accountability in promptly addressing the flaws within the Horizon system. Fujitsu's alleged delayed response and failure to acknowledge the extent of the problem contributed to prolonged suffering, underscoring a deficiency in accountability and leaving postmasters without recourse.
Human Impact on Postmasters
Personal stories featured in The Guardian and The Telegraph underscore the human impact of Fujitsu's faulty Horizon system on postmasters. Some faced imprisonment, their lives thrown off-course by reputations and careers wrongly damaged. Beyond financial repercussions, the emotional toll on postmasters was substantial, with many experiencing stress, anxiety, and mental health issues due to false accusations. The human impact of Fujitsu's technical failures extended far beyond financial ramifications.
Implications for Procurement
1. Reputational Damage
The reputational damage suffered by Fujitsu and Post Office alike, serves as a cautionary tale for procurement functions. When selecting and managing suppliers, procurement must weigh the potential impact on their organisation's reputation, considering the interconnected nature of reputations in a networked society. Procurement functions need to consider not only the direct consequences of technical failures but also the networked nature of reputational damage, where the actions of one supplier can have ripple effects on the reputation of the entire supply chain.
2. Ethical Concerns
The ethical concerns arising from Fujitsu's involvement in the scandal are crucial considerations for procurement. Organisations looking at Fujitsu as a supplier should carefully evaluate the ethical implications of such partnerships. Beyond technical capabilities, ethical considerations should be integral to supplier selection, ensuring that suppliers uphold standards aligned with the organisation's values.
3. Risk Mitigation Strategies
The need for robust risk mitigation strategies is paramount for procurement functions considering Fujitsu or similar suppliers. Thorough due diligence, diversification of suppliers, and ethical considerations should be prioritised in decision-making. Procurement functions need to delve deep into a supplier's track record, assessing not only technical capabilities but also responsiveness, accountability, and ethical practices.
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The Importance of Good Supplier Management
Effective supplier management is crucial for safeguarding organisations against the risks highlighted by Fujitsu's role in the UK Post Office scandal. Recommendations include the following key aspects:
Comprehensive Due Diligence
Rigorous due diligence is essential when selecting and managing suppliers. Procurement functions must go beyond contractual obligations and assess suppliers' ethical practices, reliability, and historical performance. Comprehensive due diligence should include a detailed examination of a supplier's technical systems, capacity to address issues promptly, and alignment of behaviours with the organisation's values.
Proactive Supplier Management
Procurement functions should adopt a proactive approach to supplier risk, performance, and relationship management, continuously monitoring and evaluating suppliers. Identifying potential issues early allows organisations to mitigate risks before they escalate. Proactive risk management should encompass not only technical risks but also broader ethical considerations, ensuring a comprehensive understanding of potential vulnerabilities. Measuring supplier performance to drive continuous improvement is a must, and a structured relationship program underpinned by joint account planning is key for strategic suppliers.
Collaborative Relationships
Building collaborative and transparent relationships with suppliers is vital for procurement functions. Clear communication channels contribute to early issue resolution and prevent long-term problems. Procurement functions should segment the supplier base to prioritise suppliers who demonstrate a commitment to collaboration, transparency, and ethical practices. Collaborative relationships foster an environment where both parties can address challenges openly, leading to more effective issue resolution.
Benchmark your organisation's supplier management
This horrible tale of the genuine impact on Postmasters highlights the need for a comprehensive approach to supplier management. A must for all organisations managing suppliers critical to the success (or failure) of your organisation. To undertake a free benchmark of your organisation's supplier management capabilities click here or visit www.srmsurvey.com
Author:
Alan Day is the founder and chairman of State of Flux, a global procurement consultancy and SRM software company.
If you would like to talk about your supplier management, please book a time in his calendar or contact us at enquiries@stateofflux.co.uk.
At State of Flux, we believe that the route to enhanced business performance is how organisations engage and support their suppliers. We specialise in designing bespoke Supplier Management programmes that assess existing supplier value while also identifying and unlocking collaborative routes to add value for both customer and supplier organisations.
