Don't be the odd one out... comply!

How Can We Better Manage Compliance Across The Supply Chain?

New research states that half of global firms have faced supplier non-compliance challenges.

Don't be the odd one out... comply!

2014 was a year marred by risk… Whether we’re talking about plentiful product recalls, compliance and environmental issues, or devastating data security breaches – it seemed supplier compliance management was never far from the spotlight.

Today, companies are increasingly being held responsible for the actions of their suppliers, thus breaking the long-held tradition of the buyer turning a blind eye. Ultimately the blame and consequences of the actions lay at the gates of both parties – forcing buyer and supplier to tackle tricky compliance issues head-on.

At the same time supply chains are growing larger, heightening both the impact and odds of non-compliance incidents. As a result companies, customers, NGOs, and regulators are rapidly stepping up their efforts to manage and monitor compliance across their suppliers. The expectation for companies to develop comprehensive supplier compliance policies,  along with regular audits and inspections to evaluate supplier compliance is a heavy cross to bear…

In order to gauge the challenges presented MetricStream conducted an in-depth survey that looked into the ways organisations across industries are managing, measuring, and monitoring supplier compliance. Respondents were made up of 100 supplier compliance and governance professionals from various industries.

The survey found…

The survey contains seven main areas of concern. We’ve highlighted some of key the findings below.

Non-compliance issues around management systems and documentation are widespread

The most common area of non-compliance was around management systems and documentation (59.5 per cent). This highlights non-compliance with a company’s internal documentation such as product specifications and quality policies; or, absence of systems and processes at the supplier’s end to ensure compliance with external regulations.

The other dominant area of supplier non-compliance pertains to Environment, Health, and Safety (EHS) standards (29 per cent). In the last few years, some of the world’s most reputed brands have been criticised after their suppliers were found to be violating environmental norms, or running factories that were unsafe and exploitative.  Companies will need to find ways to strengthen supplier compliance with EHS standards, keep pace with new regulations and guidelines in the field, and resolve or mitigate compliance issues before they occur.

Local laws are often overlooked

Only 43 per cent of respondents focus on local laws while drafting supplier policies. This could be a cause for concern, especially since local laws vary from one region to the next. For instance, the minimum age for employment in China is different from that in the US. If companies overlook these differences when drafting supplier compliance policies, they could face regulatory penalties.

Compliance information is only gathered when potential suppliers are being evaluated

Most of the respondents indicated that their organisations gather supplier compliance information either when evaluating a potential supplier (50 per cent), or while onboarding a supplier (26 per cent). Only 19 per cent of organisations gather supplier compliance information when adding a new product or service to the supplier’s portfolio.

To read the full findings you can download the report from here.