Rules and regs are meant to maintain safety and security for everyone. Which is a major component for supply chain and manufacturing. This is where supply chain compliance comes in.
Below, we explain what supply chain compliance is and the 4 best practices to maintaining it.
What is Supply Chain Compliance?
Supply chain compliance refers to the adherence of companies to relevant laws, regulations, and industry standards throughout their supply chain operations. It involves ensuring that all aspects of the supply chain, from sourcing raw materials to delivering finished products or services to customers, meet the required legal and ethical standards.
Therefore, it’s crucial for maintaining the integrity of the supply chain, mitigating risks, and upholding the reputation and credibility of the organization.
Key aspects of supply chain compliance include:
- Labor Standards: Ensuring that suppliers and partners follow labor laws, including fair wages, reasonable working hours, safe working conditions, and no use of child or forced labor.
- Ethical Sourcing: Ensuring that raw materials and components are sourced responsibly, without contributing to illegal practices, environmental harm, or social injustices.
- Environmental Regulations: Complying with environmental laws and regulations throughout the supply chain to minimize the environmental impact of operations, including waste management, emissions control, and sustainable practices.
- Product Safety and Quality: Ensuring that products meet safety standards and quality requirements, and that they are produced and handled in accordance with relevant regulations.
- Data Protection and Privacy: Complying with data protection laws and ensuring that customer and employee data is handled securely and ethically.
- International Trade Regulations: Adhering to trade laws and regulations when dealing with imports and exports, including customs duties, trade restrictions, and export controls.
- Anti-Corruption and Bribery: Implementing measures to prevent corruption and bribery throughout the supply chain and complying with anti-corruption laws.
- Conflict Minerals Compliance: Ensuring that minerals sourced from conflict-affected regions are not used in products, as required by regulations such as the Dodd-Frank Act.
- Social Responsibility: Engaging in socially responsible practices that support the well-being of local communities and stakeholders affected by the supply chain.
- Supplier Audits and Monitoring: Conducting regular audits and assessments of suppliers and partners to ensure ongoing compliance and identify areas for improvement.
Maintaining supply chain compliance often involves close collaboration with suppliers, vendors, and partners. Companies may establish codes of conduct, supplier agreements, and verification processes to monitor compliance. Additionally, companies may seek certifications, such as ISO 9001 for quality management or ISO 14001 for environmental management, to demonstrate their commitment to supply chain compliance and sustainability.
Best Practices for Maintaining Supply Chain Compliance
When it comes to keeping their supply chains safe and in line with local regulations, industry needs vary.
For example, food manufacturers may need to keep a closer eye on timelines and temperatures to ensure food safety, and manufacturers of military equipment may need to be more thorough about ensuring that only people with the right security clearances can access their goods. And, of course, the official regulations will vary from one country to the next.
However, any business that sells physical goods should be keeping a clear handle on the origins and the journeys of their products — and the supplies or ingredients used to make those products. After all, a better understanding of your products gives you more data on how to improve what you sell — and how to increase profit margins, too.
Plus, vendors and retailers can use supply chain data to better market their products, and logistics and manufacturing companies that offer better records and transparency may gain an edge with vendors.
Here are some of the best practices for supply chain compliance that can apply to every industry.
1. Evaluate and onboard new suppliers carefully
A big part of supply chain safety, security, and compliance is making sure that the suppliers you choose to work with are operating within the bounds of the law and sourcing their products ethically.
Before you sign on with any supplier, you need to gather some evidence that they’re following all the rules.
It can help to think of onboarding a new supplier the same way you’d onboard a new employee. You’ll need to do your background research and check references beforehand, and carefully “train” them as they first start up so that they understand your standards for behavior.
And just like employees, it can help to use set procedures for this vetting and onboarding process so no step is skipped. It also helps to have suppliers sign an agreement that they understand your values and agree to operate accordingly.
Beyond that, you can also use third-party services to assess risk and evaluate compliance for any prospective supplier, and incorporate this step into the supplier onboarding process.
2. Store supplier data centrally (and organize it visually)
It’s easier to make sure that you have all updated information on your suppliers when you keep all supplier-related documents (insurance, safety, legal, etc.) in one secure, central location where people from all relevant departments can see and manage it.
Some supply chain management software programs can handle this job, plus they can display supplier information and data in dashboard format. Dashboards and reports can show both suppliers and sub-suppliers, and can even allow users to sort suppliers visually based on things like their inventory and their invoice status.
Software programs can also come with other helpful features, such as alerts for when a supplier’s certification is expiring.
Regardless of how you store supplier data, you should have a way to remind yourself to re-evaluate suppliers regularly for things like updated certification, compliance, and commitment to your company’s values (such as sustainability or fair labor practices).
3. Improve product tracking and labeling
Trusting your suppliers and keeping track of their certification is important, but many manufacturers and distributors are taking things further by keeping track of each individual product.
An increasing number of industries — from electronics to food and beverage to pharmaceuticals — have embraced sophisticated tracking methods that make it easier to tell where any individual unit or product has been. Typically, this happens via assigning a unique number or alphanumeric code to each product, then encoding that serial number in barcode form on the product’s label. However, as we wrote in our post on food traceability, some companies are getting creative and using blockchain apps or even DNA tags for food to help trace products through the supply chain.
These tracking features and programs make it easier to quickly find out where any particular product has come from, which in turn makes it easier to handle potential recalls more easily or pinpoint which products have been affected by contamination. Keeping detailed tracking info for each product also makes it easier to identify authentic products and spot counterfeits.
The company Loftware, which offers a digital platform for companies to produce and manage their own product labels and artwork, notes the difference between tracking and tracing in their report published in Supply Chain Management Review.
Tracking “refers to following the movement of product from one place to the next, and the activity surrounding that transaction,” while tracing “is all about identifying a product’s origin—including the parts or materials used in making it.”
Tracking is more about the logistical touch points of moving the product, while tracing is about keeping records and certificates that can be used to identify the original source of a product.
However, the best companies are using tracking and tracing to their advantage.
4. Keep track of visitor details
Besides keeping details about the timing and location of a product’s origin and its journey throughout the supply chain, good supply management also requires a record of which people had access to the product or ingredient throughout its lifetime.
For most industries, it’s a best practice to limit the number of people who have access to the product overall. This decreases risk that a product could be tampered with and maximizes security.
Some industries also keep more detailed information about who has had access to their facilities, and when. In fact, tracking visitor access is required of companies that want to join the Customs-Trade Partnership Against Terrorism.
Related post: The Business Advantages of C-TPAT Certification
Other organizations, such as the International Standards Organization, also include visitor recordkeeping in many of its standard practices for various industries. And, of course, some sensitive materials will always be subject to regulations by the government, and many of those regulations include visitor tracking.
Although you must take care not to infringe on visitors’ personal privacy, tracking visitor data has other benefits, too. You can use it to better assess how much staff you need, for example, and understand who is coming to your facility and why.
If you’re ready to try a top-rated visitor management system, we invite you to try The Receptionist for iPad for two weeks free. The Receptionist for iPad is a great fit for manufacturers, logistics companies, and warehouses. Take the product tour below to learn more.
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