SUPPLY CHAIN COMPLIANCE CHALLENGES AND SOLUTIONS - Global Trade Magazine
  July 16th, 2020 | Written by

SUPPLY CHAIN COMPLIANCE CHALLENGES AND SOLUTIONS

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  • “One thing supply chains hate is variance, and there’s going to be a lot of variance and volatility on the demand side.”
  • The subject of compliance doesn’t have to be messy.

In the current trade atmosphere both domestic and international supply chain players have a myriad of concerns to consider while determining the next step in successful operations. Specifically, in 2020, these concerns have challenged shippers, carriers, manufacturers, distributors and other trade players to mitigate risk in new ways on an almost monthly basis.

The year kicked-off with the highly anticipated IMO 2020 regulation disrupting ocean shippers and carriers. IMO 2020 left many scratching their heads and trying to figure out the best way to navigate compliance and the latest trade tariffs without halting operations. For the most part, shippers were prepared, and IMO wasn’t nearly as scary as doomsayers made it out to be. However, for those that waited until the last minute to implement required changes, the transition left some compliance pains and costs that were avoidable.

Fast-forward to mid-January, and the appearance of the COVID-19 pandemic. Global trade and its supply chains were abruptly impacted, as the coronavirus started in China and eventually moved on to Italy, South Korea and other global markets. Businesses rapidly started temporarily shutting down amid a global panic. Supply and demand shifted while talk of force majeure slips—acknowledgements that contracts cannot be fulfilled due to unforeseen circumstances—shined a light of hope for the devastated Chinese suppliers. As of the second week in March, the National Trade Promotion System confirmed the issuance of more than 4,000 force majeure certificates as the U.S. prepared for the virus to disrupt domestic markets and business.

“The virus is the primary cause of the supply-chain impact but the secondary causes coming from the virus include financial, regulatory, compliance and legal,” explained David Shillingford with Resilience360 at the 2020 Modex conference. “One thing supply chains hate is variance, and there’s going to be a lot of variance and volatility on the demand side.”

So, what do these things have to do with compliance? The answer is all-encompassing. These and other disruptions will ultimately prove which players in the supply chain can stand the test of compliance and regulation risk mitigation and which ones are simply unprepared. For now, companies across the supply chain would be doing themselves a favor by reviewing regulations, disclosures and other compliance-related documentation and processes to ensure the highest level of compliance is achieved, if not already. As the National Law Review puts it in the article “Managing the Commercial Impact of the Coronavirus: An Effective Supply Chain Response Plan:”

Public companies should review and make accurate required disclosures, in the event that business operations are impacted such that a reporting requirement is triggered. All companies who are parties to credit agreements and other financing arrangements should review existing MAC clauses, and potential impacts on the borrower’s financial covenant compliance, in order to determine whether any proactive conversations with lenders may be warranted.

The takeaway is simple: Proactive measures should be in place among all links in the supply chain before, during and after major industry disruptions and changes in policy, regardless of the specific market operations. Factors including transparent communications, emergency planning and navigating an evergreen supply chain atmosphere can prevent costly fines and waste. Shifts in supply and demand are inevitable and it’s not a matter of if regulations will be accounted for, it’s a matter of when they will be accounted for. Don’t wait until your business is required to prove compliance. Instances like a global health crisis are one of many examples of how noncompliant companies can create unneeded delays or worse if found to be noncompliant. Visibility is key and it starts with your business knowing every moving part of the chain and your involvement with its success.

Visibility tools are every company’s best friend when it comes to compliance, providing a new level of security for both small and large-scale operations. Compliance issues come in a host of various forms from cyber risk and government sanctions to ethical trade practices and supporting sustainable practices and demand. And more recently, global supply chains have been shaken by natural disasters and global health concerns. Whether it’s a natural or unnatural occurrence, there’s no reason to be unprepared when it comes to compliance and preparation. These are all issues that require accountability on behalf of the partners involved. Ignorance is not excuse in the modern age where technology advancements, procurement and systems of checks and balances are created at each point.

“Knowing who you’re doing business with and ensuring your supply chain is compliant isn’t just a necessity; it’s good for the bottom line,” states Hemanth Setty, senior product director, Supply Chain Management & Compliance Solutions at Dun & Bradstreet, in his blog “7 Steps to Supply Chain Compliance.” Setty dives into why and how companies are challenged with a new list of onlookers requiring compliance and an ongoing approach rather than quick fixes to placate regulators.

He notes that the modern supply chain player now has “investors, suppliers, partners, customers and the media” to satisfy when it comes to compliance. Solutions presented keep department collaborations and meeting the expectations of customers at the top. But before a company can meet expectations, they must understand exactly what is expected and that requires transparency from the beginning, throughout the chain. This includes a pulse check on data and ensuring it’s up to date and preparing for the unexpected. Setty also advises that all corporate policies and procedures are understood across the board to avoid inconsistencies when onboarding new vendors and adding to the business.

The subject of compliance doesn’t have to be messy. In fact, the solution to many compliance issues is clear. When compliance is a priority in business, all other parts of the chain follow suit. Keep communications open and well understood, keep ethics at the forefront of operations, and be mindful of the changing regulations and potential disruptors that can easily shake the bottom line. Understand what expectations are and how critical it is to meet them. Utilize technology to support large-scale supply chains and eliminate mistakes with updated data and processes.