Supply chains: Danger ahead!
The supply chain in most multinationals has evolved over many years to minimize the cost of raw materials, labor, transportation and taxes. The supply chain is further complicated by mergers, acquisitions, divestitures and partnerships. Given the pace of business, it is unlikely that underlying business processes and supporting IT applications are thoroughly analyzed and improved to accommodate each change.
New regulations are making supply chain management even more complex. In recent years, the U.S., the European Union and others have created a number of regulations that are creating a great deal of work for large companies that manufacture or handle physical products. The regulations require such companies to regularly gather and report additional data about their supply chain. New IT support will be required whether the company gathers the information itself or engages the services of a third party.
The supply chain team must understand all significant legislation, including:
The U.S. and the EU have other supply chain regulations in addition to the ones listed above.
China, Denmark, Malaysia, South Africa and others have created or are creating their own regulations. Most of this legislation has three primary goals: keeping products safe, reducing human trafficking and helping stem the use of product profits to fund continued fighting. While these goals are laudable, these new requirements complicate supply chain management even further.
Moreover, since these regulations are being created by different governments, the resulting data is not shared, and the enforcement processes are neither coordinated nor consistent. Even within the U.S., regulations vary from state to state. Complicating matters even further, requirements will likely change as the list of conflict materials grows and war zone boundaries spread or contract. Compliance violations can result in stiff fines, publicity nightmares and lawsuits from plaintiffs alleging unfair business practices.
Since supply chain software products were typically not designed with all these regulations in mind, creativity will be necessary to collect and manage the additional data mandated. If it has been some time since your supply chain was reviewed, leverage the demands of these regulations to create a business case that justifies renovation of your supply chain monitoring processes. Even if your supply chain was recently streamlined and associated processes upgraded, the regulations are likely to result in significant amounts of work for IT. Start lobbying for additional budget and staff now.
Bart Perkins is managing partner at Louisville, Ky.-based Leverage Partners Inc., which helps organizations invest well in IT. Contact him at BartPerkins@LeveragePartners.com.