Gone are the days when business organizations and brands allowed their supply chain to do whatever they wanted without much compliance expectations as long as they showed results.
Today, compliance is not just expected; it is demanded from every supply chain, irrespective of the industry and, in many cases, the country.
Contrary to many schools of thought, supply chain compliance isn’t just a one-time job that you try to get it over with. It is a continuous process, and you must ensure it becomes the very fibre of your supply chain management program.
In this article, we take a deep dive into keeping your supply chain compliant, what it is, why it matters, and best practices to get started.
What is Supply Chain Compliance?
Supply chain compliance is an ongoing process. It is the conformity of the supply chain operations to laws, regulations, and standards throughout the supply process.
It covers every facet of the supply chain, from sourcing raw materials to production, inventory, and product delivery to the consumer.
Supply chain compliance is not just about policies or government rules.
In fact, it has more to do with ethical, environmental, and safety standards, especially because that is what the main stakeholders of the supply chain care about.
Through compliance, supply chains are more accountable and transparent with their operations.
Why is Supply Chain Compliance Important?
There are a number of reasons to consider supply chain compliance. Here are some of them.
Legal Requirements
Your supply chain can adhere to local, national, and international laws and regulations through compliance.
Mainly because a failure to comply can lead to legal repercussions, fines, and reputational damage, secondly, it’s just good business and reduces the risk your supply chain is exposed to.
Ethical and Social Responsibility
Compliance with moral and social responsibility standards shows your supply chain’s commitment to fair labour practices, environmental sustainability, and ethical sourcing.
It aligns the supply chain with societal values and expectations, boosting customer trust in your business.
Risk Mitigation
A lot of risks in the supply chain are internally generated. From quality to safety, security, and ethics violations.
You can identify and mitigate these risks through supply chain compliance before they become a genuine problem for your supply chain. When your supply chain risks are detected and managed early on, you save it from potential liabilities and disruptions.
Build Better Supplier Relationships
Your suppliers will only do what they see you do, which makes supply chain compliance an effective tool to get them in line.
When suppliers see you take quality, safety, and sustainability seriously, they would naturally be forced to comply with little to no input from your procurement and quality assurance team.
Competitive Advantage
It might surprise you that not all your competitors comply with legal, ethical, or sustainable standards. Over 90% of your competitors have one flaw in supply chain compliance.
Yet, over 60% of customers are concerned about supply chain compliance. Getting it right 100% might be difficult, but that doesn’t mean you can’t try.
Moreover, it makes your business more interesting and attractive to your customers.
Operational Efficiency
Compliance makes your operations more efficient.
In one move, you can reduce disruptions, delays, and unnecessary issues with your supply chain management. Talk about a game-changer.
Best Practices for Supply Chain Compliance
1. Evaluate and Onboard New Suppliers Carefully
Suppliers are necessary stakeholders in your supply chain operations, and its success. Their buy-in into your supply chain’s goals and objectives will go a long way to determining how effective your compliance efforts will be.
To ensure you are in bed with the right suppliers, always vet them thoroughly. You can do this by checking their reputation in the market or industry. You could also verify past operations and the clients they have worked with.
Always remember that it is easy to camouflage, and when suppliers want your business, they will do and say anything to make it work. Take the time to do your due diligence to uncover any nefarious or hidden truths.
2. Stay Current With New Regulations and Standards
Across the globe, policies and standards are always changing. To be supply chain compliant, you have to stay abreast with all changes in every part of the world your supply chain operates on.
For instance, Germany’s Supply Chain Due Diligence Act was enacted in January 2023. If your supply chain had operations there, you would have had to make some changes if it did not fit the new law.
Staying current keeps you and your supply chain one step ahead and prevents potential disruptions that might occur.
3. Create a Quality Assurance System
Quality is very critical to your supply chain’s compliance. To effectively enforce it, you must have a quality assurance system. Companies like Dangote have quality assurance structures for their supply chain, which helps keep the organization compliant.
You can read our article here for more on quality assurance in the supply chain.
4. Enforce Transparency
To keep your supply chain compliant, you must enforce transparency throughout the supply chain and with every stakeholder.
Transparency enables you to trace the origin of every process and product in the supply chain, which you can use to identify potential areas of non-compliance.
When your supply chain is transparent, investors and customers have more trust in the outcome. They also trust every product in the supply chain.
Read our article on supply chain transparency for a more detailed overview of the concept.
5. Invest in Collecting, Securing, and Analyzing Data
Supply chain data has emerged as the next big thing for many organizations hoping to optimize their supply chain operations.
The same data can be very useful in enforcing compliance because it helps you collect and analyze information on your supply chain management. It factors in all the arms parts of your supply chain and all your suppliers.
With the right information and data analytics, you can identify areas and suppliers coming short with rest to compliance. More than that, you can also determine why they are falling short, allowing you to devise tailored solutions to that particular problem.
FAQ on Supply Chain Compliance
Q1: How does supply chain compliance relate to due diligence?
A: Conducting due diligence entails evaluating and confirming partners, suppliers, and procedures to make sure they adhere to compliance standards.
It is a stage of risk management that is very crucial.
Q2: How can businesses deal with compliance in international supply chains?
Businesses may address global compliance by being aware of and abiding by local rules, working with specialists in international trade, and putting standardized compliance mechanisms in place everywhere.
Q3: How does sustainability benefit from supply chain compliance?
Environmental sustainability strategies, such as waste reduction, resource conservation, and responsible sourcing, are frequently included in supply chain compliance, helping to create a more sustainable future.
Obinabo Tochukwu Tabansi is a supply chain mastro and writer with a decade of experience working in different facets of the supply chain. Today he is living his passion for writing on all things supply chain. His blog, Supply Chain Nuggets, is Africa’s fastest-rising supply chain blog, helping professionals, business owners, and curious minds navigate the supply chain complexities on the continent.
