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  June 13th, 2024 | Written by

The Disappearing Divide Between Product and Party Compliance

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Supply chain transparency is not just knowing where your products are; it equally applies to risk management. You’ll never break the chain sort of thing. In this context, it is only logical that supply chain compliance is approached holistically: no more fragmented product classification, license requirements, denied party screening and certification processes but a single, unified approach towards supply chain risk or compliance. The movement towards a single compliance program is not coincidental: party, product, and transactional compliance are everywhere, sometimes hard to distinguish from one another, and a landslide away from their original setup decades ago. Legislation, a more holistic view of compliance programs, and the progression of software solutions are the drivers that have forced and/or facilitated the unification of processes. 

Read also: Managing Risk With Trade Compliance In Global Supply Chains

Legislation and Other Developments

Legislation has focused on particular elements in the supply chain as well as on broader supply chain issues. For example, in the case of forced labor, legislation zooms in on one specific issue, yet the limitations are not just whether the factory in question is using forced labor—it is also important to understand if semi-finished products were routed through a factory where forced labor was used. As such, forced labor turns into not only an entity issue, but also expands scope into a review of the Bill of Materials. This is in contrast (addition) to European (EU and German) legislation where it can be argued there is more of a framework set forth within which (say) carbon footprints or forced labor restrictions can be further detailed. An additional example concerns current discussions regarding the Consumer Product Safety Commission (CPSC) where likely changes will affect when (product safety) certification needs to be submitted (upon import versus currently post import). Once more, this is an instance where product compliance (the product safety data is a product compliance element) is tied with party compliance (as, for example, reputational status will impact the level of scrutiny or even interest in doing business with a particular party).

Rumors don’t work; facts are needed: add to this legislative component a trend for more—and more immediate insights—into market (i.e., supply chain) disruptions, whether a blockage of the Suez Canal, a volcano outburst in Iceland, or a renewed focus on transshipments of certain products, and the drivers for a ‘one view fits all’ approach are documented.

Holistic View of Compliance Programs

No more room for little opportunities or little lies in little programs. Risk management, supply chain resiliency, supply chain procurement, and sourcing platforms are officially on track to be on the same page and within the same organization. After a few major supply chain security breaches, even InfoSec has found its spot in the realm of supply chain risk management, or supply chain unity if preferred. With this holistic view comes a variety of new programs and organizational changes, and reporting lines are starting to shift from traditional structures (e.g., party screening under legal, product compliance in the shipping or trade department, and sourcing in procurement). Back up a paragraph and it is evident that if a party or product is failing to pass a security check, alternatives need to be found. This means procurement gets tasked and where better and more efficient to complete that task than within the framework of a holistic supply chain program (versus a standalone procurement process only after which the relevant risk assessments are completed)?

Software Solutions

The supply chain software market has evolved. With a proper AI injection, possibly chatbot- or language model-driven, an ongoing machine learning (ML) component to it, and a never going back again mentality, solutions or platforms for supply chain mapping, single/aggregate risk management and opportunity assessment don’t stop popping up or expanding scope. It is a critical part of the trifecta—program – team – application—and supply chain software vendors are aware that a singular, difficult-to-integrate-with solution is nothing but an albatross. This is not to imply that companies will opt for a single vendor but to submit that companies will require vendors to collaborate, ideally and soon, within a single platform/view/UI/login.

The supply chain value proposition goes hand in hand with best-in-class compliance solutions. These come with APIs, flexible integrations, and higher levels of configuration (versus customization) that allow companies to truly leverage the best parts of what supply chain software vendors have to offer. Add a chatbot or two, pay attention to the committed roadmap, and Gen AI capabilities and dreams can well come true: solutions that facilitate traditionally separated teams to happily work together and ensure holistic compliance programs can effectively navigate new, global legislative changes. 

Parting Thoughts

While building out from a modern solution is perhaps simpler than assumed, navigating from more secluded teams towards a corporate supply chain unity/risk/resilience team with representation across functional teams where product and party compliance blend together is not without challenges. Letting go of more traditional compliance management tasks in favor of integrated compliance management solutions, platforms, and communication will also require a healthy dose of change management across the organization.