It can be challenging for businesses to maintain a fine balance between being compliant and obtaining operational efficiency. To fulfil the demands of internal economic drivers in an organization, we need to carefully analyze the best possible priority list.
What is Supply Chain Compliance?
Supply chain compliance is an umbrella term describing the discipline emerging to manage the evolving business conditions, in which access to environmental, health, safety, and social risks of raw materials and finished goods becomes a critical component of transactions and customer/supplier relationships.
Rapidly changing customer demands and global spread of supply chains in organizations have led to uncertainty and complexity. In order to mitigate operational, legal, and business continuity risk, businesses must increase certainty. They need to set standards, collaborate, and communicate more transparently with partners and on the whole, take care of the internal and external ecosystem, making sure that supply chain operations do not impact the stakeholder community negatively.
Now compliance has become an integral component of calculating risk. The new compliance reality dictates ensuring compliance and qualifying the risk profile of not just your finished goods but also for your raw materials or distributed products, including packaging.
With compliance comes the onus of companies to be effective in their operations. There cannot be a trade-off between compliance and efficiency. Companies need to work towards achieving high efficiency in their supply chain operations while being collaborative and compliant.
Given below are 3 key points that talk about how organizations can improve quality and efficiency of their supply chains and also at the same time increase compliance and mitigate risk.
- Regulatory compliance
Companies in a variety of industries are increasingly focused on balancing customer growth with compliance with country-specific regulatory requirements.
Fines and penalties are just the tip of the iceberg when it comes to the cost of non-compliance: other hidden costs can include returns and customer issues resulting from a non-compliant product, and implementing new tracking systems if they don’t already exist. The rise of global sourcing as a means to minimize costs has had an unintended consequence of increasing risk, in addition to regulation concerns. Dependence on an increasing number of suppliers makes it difficult to monitor their performance without automated metrics.
Quick safety checks
- Does your organization’s traceability system allow for current and emerging global compliance regulations?
- Is someone in your organization responsible for maintaining compliance requirements for varying and changing regulations such as serialization/ePedigree, RoHS, WEEE, REACH and others?
- Does your organization have compliance management systems to ensure materials and supplier certifications are up to date?
- Procurement compliance
Distributors and manufacturers face the challenge of reducing procurement, transportation, and logistics costs at a time when supply chain complexity is rapidly increasing through outsourcing and globalization.
To help with effective distribution in an expanding number of regional markets, distributors as well as manufacturers increasingly rely on third-party logistics (3PL) providers to handle international transport of their products. This strategy enables companies to both reduce distribution costs and mitigate risk of damage to their products, and thereby contribute to their primary business objectives. Businesses can adopt visibility, collaboration, and traceability systems & processes to meet both, regulatory and consumer standards.
Quick safety checks
- Does your organization outsource any part of production internationally? If so, do you employ a 3PL provider to mitigate risk, increase customer satisfaction, and reduce transportation costs?
- Does your organization have a supplier scorecarding system to ensure your suppliers meet regulations and standards?
- Do you have an automated system in place to calculate the correct duty amounts in order to avoid fines and penalties?
- Do you have a system for tracking the variety of country regulations pertinent to your industry, and ensuring that your products meet those standards?
- Areas outside your direct control
Unforeseen environmental, political, and economic crises can stop a supply chain or Value chain planning in its tracks. A recent incident that halted production for a variety of industries across the globe was the Japanese earthquake and tsunami in March 2011. Order fulfillment in a variety of industries was delayed for weeks or months, and the worldwide economic impact was severe.
While these crises cannot be prevented, companies are nevertheless on the hook for mitigating their risk of exposure to a variety of supplier-performance issues.