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From meeting local laws and industry regulations to internal compliance standards and ESG targets, how your supply chain operates can have long-term implications for your business.
But maintaining compliance is easier said than done — not least because laws and regulations constantly change, sometimes with very little warning. And, if your business operates internationally, local regulations also vary from region to region.
Keeping up with these requirements is crucial for protecting your business, the environment, and your relationship with stakeholders and customers.
Supply chain compliance refers an organization’s responsibility to ensure that all activities within their supply chain comply with the laws, regulations and ESG standards of all markets they operate in.
Key aspects of supply chain compliance include:
- Labor standards - maintaining fair pay, safe working conditions and reasonable hours for workers across the supply chain.
- Product safety and quality - ensuring that products meet quality and safety standards.
- Environmental impact – minimizing the carbon footprint of supply chain operations.
- Trade regulations - adhering to import and export regulations and restrictions.
- Data security – ensuring customer and supplier data is managed in compliance with data protection laws.
Failing to maintain compliance across your supply chain operations has serious implications for your business. There are three key consequences of failing to meet requirements.
1. Disruption to operations Your essential business processes could be disrupted as a result of non-compliance. For example, if you fail to conduct due diligence when choosing a new supplier and later discover they aren’t compliant with necessary regulations, you’ll be forced to stop working with them. This may only be until they implement the required measures, but it could cause serious disruption as you won’t receive materials for products until the issue is resolved.
On the other hand, you could discover breaches within your own organization that would require urgent attention and halt business while investigations are completed. Until more robust compliance procedures are put in place, and employees are trained to correct standards, your productivity will be heavily impacted.
2. Damage to your brand Customers want to do business with brands they can trust. If you fail to maintain compliance, it can be hard for your customers to learn to trust you again. They may even encourage others to avoid your brand.
Your brand won’t just be damaged in the eyes of your customers. If a non-compliance case is serious, it could be picked up by news sources and put prospects off doing business with you.
3. Financial costs There are two ways non-compliance can financially affect your business. Firstly, you’ve got to consider the loss of business as a result of damage to your brand and disruption to your operations.
Secondly, you could face hefty fines which can make it harder to pay bills, suppliers, and even employees.
You don’t need to worry about any of those consequences if you take a thorough, proactive approach to ensuring your supply chain becomes, and stays, compliant. Here are the three steps to follow to get it right.
Step 1 – Implement a compliance program Without a clearly defined compliance program, it’s incredibly hard for your business to consistently meet regulatory requirements. Implementing a program means you can define the guidelines and best practices that all employees must follow to avoid non-compliance. It provides a clear rulebook that everyone in the business can refer to.
Step 2 – Assess your suppliers Compliance threats often come from outside your organization. By auditing your suppliers and assessing them against your regulatory requirements, you’ll be able to ensure that expectations set out during onboarding are consistently met. Remember, this process shouldn’t be a one-off. You should periodically assess your suppliers to ensure nothing slips through the cracks.
Step 3 – Integrate your systems What’s the best way to ensure compliance, every time? By making sure non-compliance isn’t an option. How do you do this? By integrating all your systems, removing siloes, and by building compliance checks into automated workflows. Once compliance is baked into your systems and processes, you can rest assured that you’ll be minimizing the chances of a breach.
At every point along the supply chain, automation can make your processes more efficient, remove wastage, and increase productivity. You can also automate compliance across the supply chain to protect yourself and your business against fines, damaged reputation, and loss of productivity.
You can achieve this by:
- Putting automation processes in place that ensure compliance is checked (at every point of the supply chain) and, if non-compliance is found, the necessary actions are taken straight away.
- Building apps for employees that clearly define a compliant workflow. This can create guardrails that ensure your team remains compliant at all stages, leaving nothing to chance.
To find out how using Bizagi’s low-code platform to orchestrate your supply chain can help increase visibility and manage compliance, visit our supply chain page.
