How to Manage Supply Chain Compliance

by Vector | Dec 21, 2021 4:08:26 AM

Regardless of what niche your supply chain company serves, we all have a lot in common. Anyone running a business must keep one eye on compliance. How you manage compliance may depend on the size of your company. But regardless of size, all of our supply chain customers expect us to maintain compliance.

To clarify, when I say our customers, I mean in the holistic sense. Yes, we manage compliance for our external customers. That includes our downstream sub-tier suppliers, but it also includes our upstream customers. To fulfill the future vision of supply chain compliance, we can use the technological tools that lead to visibility for our entire value chain.

Supply Chain Compliance and Visibility

But we also know there are other categories of compliance that are more in-house. For example, we also must meet and measure compliance when it comes to our internal customers: our employees. We're selling our business to our internal customers, hoping they build their careers and lives with us. We ensure we're compliant with the IRS and managing each 401(k) properly. Meeting insurance requirements. Exceeding OSHA compliance.

Tied to that, we also must comply with the laws of the land. This category includes following the laws enacted by state, local, and federal officials. Think of EPA compliance. Or if you work for a carrier, think about the FMCSA's Hours of Service (HOS) requirements for your drivers. In addition, there are restrictions on the number of containers that can be stacked. Even something like noise pollution. There's so much supply chain compliance to monitor.

Ultimately, if you want to go full "woo," we must comply with ourselves and our personal value structures. Whew! That's a lot to manage. No wonder you're so exhausted at the end of the day! But manage it all we must.

So let's start tackling this question. How do we manage supply chain compliance?

Wilco, and How to Be Alive

Why do we have compliance in the first place? OK, here's a quick analogy.

First of all, I can't talk about compliance without bringing up my favorite band, Wilco. In the military, that stands for "will comply." But Chicago-based Wilco is a Grammy-award-winning, dad-rock outfit with a cache of genre and mind-expanding songs that never really fit the traditional mainstream music-industry mold.

As such, I have a decades-long debate with one of my friends regarding which Wilco lyrics are the best. I argue they are found in the song "War on War," from the album Yankee Hotel Foxtrot.

Indeed, it's a favorite song for both of us and worth checking out. For amidst the funky digeridoo and mid-tempo guitar, we get hard-but-cathartic lyrical truths.

First of all, lead singer Jeff Tweedy lays out the premise of the song in very Dexter-ish terms. There's a war, on war. Then Tweedy gently explains how we're going to wage this war on war:

"You're gonna lose / You have to lose / You have to learn how to die / If you want to want to be alive."

Tuesdays With Memento Mori

This is sage, stoic advice in the philosophical tradition of memento mori. Translated from Latin, that means "Remember that you have to die." In addition to the Stoics and Jeff Tweedy, Steve Jobs was also quite fond of the idea of memento mori. So much so, in fact, that Jobs famously included a story about the life-affirming value of looking in the mirror and pondering one's death in his superlative 2005 Stanford commencement address.

And now, when I see my own ghastly reflection in the black mirror of one of Jobs's smartphones, I can't help but remember his sage words. And this moment of memento mori is always immediately followed by the smart pang of regret for having just spent another hour doomscrolling social media.

Left to our own devices, we choose our worldly vices. Only the fear of death itself prods us into the right course of action. And when that doesn't work, we have compliance!

Supply Chain Compliance and Oversight

Compliance and corresponding oversight essentially means that we have a greater degree of control. Visibility of the compliance processes of your value chain ensures your organization is meeting quality levels and executing processes properly.

Why the emphasis on visibility? Here's an example of compliance from the manufacturing world.

Say you sell parts to an original equipment manufacturer that sells its finished product to the federal government. Uncle Sam is notorious for his compliance mandates. So, because your customer's customer has a compliance requirement, it becomes your requirement.

Say the government compliance requirement includes a very tight tolerance specification that's included in the design and on the bill of materials. What does that mean? That means Uncle Sam's compliance requirement just became your raw material supplier's compliance requirement. In short, we manage down-chain to ensure compliance up-chain.

As such, supply chain compliance tends to be an involved process. This requires resources. Maybe this project accounts for only a portion of your revenue. On top of that, it's the government, so perhaps you have pricing pressure on top of it. Perhaps the effort makes you ask if compliance is even worth it?

What happens when your supplier produces a batch that's just slightly out of spec and offers it to you at a discount? Well, first I'd suggest checking your internal compliance gauge. Are you doing the right thing here?

If that fails, it's worth noting that depending on your product, the ultimate end user might be a person whose life depends on the compliance of all subcomponents! Let's not risk catastrophic failure for a few bucks.

And ultimately, by executing compliance, you're actually taking measures to secure your trading partnerships.

Supply Chain Compliance Costs

Managing the various compliance requirements of regulated business operations can rack up some overhead. But compliance also ensures there's a level playing field. Without compliance requirements, how else do you know you're quoting apples to apples?

Beyond that, the harder the climb is, the less congestion there is at the top. Put another way, the more entry barriers you must hurdle in order to win the business, the more insulated you are from your competition.

In real terms, becoming International Organization for Standardization (ISO) registered may seem like a painful process. Yes, it will require resources, people, and capital. But many organizations use ISO compliance as a quality management standard. When an organization is ISO registered, it proves that the organization provides products that comply with certain requirements. The ISO 9000 series regulates quality standards.

There's quite a bit of legwork involved in this type of compliance. You must map all your processes. You have to collect and store data for each process according to requirements. But ultimately, you'll be able to say "We're ISO registered." And this is shorthand for "We comply."

When you can sit across the table from a potential customer and tell them you're ISO registered, it answers many questions about your quality and compliance. How many new customers must you win to see a positive return on investment?

Streamlining Supply Chain Compliance With Digitization

In the past, reporting and managing supply chain compliance required a lot of legwork. This is essentially true of any audit scenario. Here's where digitization software can streamline your office.

Document digitization eliminates the paper from paperwork. In turn, you can store digitized documents on the cloud.  As such, when you need to produce documents or data sets for a report or audit, you can retrieve them in a matter of seconds. Compare that with hours at the filing cabinet, stacking papers into a pile of banker's boxes!

In truth, the applications for document digitization are many. The advancements in tech become our advancements. This is especially important in terms of achieving compliance in the supply chain.

Let's just agree that once we win back some free time, we'll do our best to put that time to good use. In other words, let's declare war on doomscrolling!

Wilco to that!

This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.

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