Each country that
you add to your list of the global market is another set of regulatory trade
requirements you have to adhere to. Ignoring these requirements could lead to
fines or jail time.
Companies involved
in the supply chain need to be supply chain compliant.
What Is Supply Chain
Compliance?
Traditionally, the
focus has always been on inventory quality, price, and schedule, but now supply
chain players and regulators are required to identify risks in the supply
chain. Initially, supply chain compliance was enforced by the regulators, but
now even the investors, suppliers, and media want to know whether companies are
compliant.
Compliance doesn't
protect from fines alone; it also protects your brand image. Customers want to
know whether you're compliant with the set regulations. Keep in mind that
compliance doesn't apply to just you; it's also all other businesses in your
supply chain.
Supply chain
compliance is complex, and most companies will ignore some of the requirements.
However, the compliance requirements are put in place to reduce risks in the
supply chain. Remember that supply chain risks can occur at any stage of a
product’s lifecycle. For example, companies that deal with diamond rings need
to conduct due diligence on how the diamonds are extracted to the final
product.
There are so many
companies involved in the lifecycle of a product, and achieving compliance for
all these companies involved seems impossible. However, all companies involved
can achieve compliance through cooperative effort.
How To Achieve
Supply Chain Compliance?
Governments across
the world continue to formulate new policies and regulations that affect the
supply chain. Companies can reduce the effect of these rules by:
1. Supply
chain awareness
Understand your
supply chain and all the players involved. The supply chain is complex, and a
single interruption could have adverse effects on the entire chain. However, if
you understand each component of the supply chain, you can identify and cushion
your company against the risks involved.
2. Evaluate
Regulations
Some of the
regulations that affect the supply chain include:
- General Data Protection Regulation (GDPR)- It affects companies that collect customer data, especially for citizens of countries in the EU. GDPR seeks to hold companies that transact in the EU accountable for protecting customer data.
- Conflict Minerals regulation- This regulation requires companies dealing with columbite-tantalite, gold, wolframite, and cassiterite to submit conflict mineral disclosures.
- Restriction of Hazardous Substances (RoHS)- It applies to companies that are involved in the manufacturing, importing, distributing electrical and electronic equipment. RoHS seeks to regulate the level of 10 restricted substances in electrical and electronic equipment.
- Export Regulations- If any company in your supply chain imports products, you need to keep an eye on the export regulations of the source countries. A change in the regulations can affect the entire chain, but with adequate preparation, these regulations have minimal to zero impact on your business.
Other regulations
include; Title 21 CFR Part 11, environmental laws, etc.
3. Compliance
Manual
A compliance manual
will include all the policies, laws, and regulations that affect your business
and the supply chain. The manual should also have the procedure for reporting
compliance violations across the supply chain.
Even with a strict
compliance program, it’s hard to ensure everyone adheres to the rules unless
there is someone following up. You can delegate this task to a team that will
follow up on all the supply chain members and ensures that all members are
compliant. Create a checklist of documents that each company requires to show
that they’re compliant.
Maintain compliance
Ensure that you
remain updated on new regulations, revisions, amendments, etc. Also, keep your
supply chain informed on the changes. Use regulatory monitoring tools to keep you
updated on these changes.
Make compliance a
prequalifying factor when choosing a new supplier. Ensure that your suppliers understand
the importance of supply chain compliance and the consequences of violation.
Due diligence should be a priority every time you bring in a new vendor or
business partner. Compliance is an ongoing requirement, and while some might
see it as a low priority, the impact of non-compliance is quite dire.
Therefore, develop a compliance strategy and take it seriously.
