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Stay a step ahead: Meeting regulations in your supply chain as they arise

March 31, 2022

There has been an increasing number of regulations in various countries requiring businesses to have transparency and due diligence into their global supply chains. 

A challenge for most businesses is keeping up with the new and ever changing requirements, which quite often demand operational adjustments and in-depth knowledge about their extended supply chain. 

Rather than addressing regulations as they surface, supply chain leaders need to invest in initiatives designed to gain this transparency into their various tiers of suppliers. This includes being able to collect the right data from their supply chain to ensure sustainability and compliance. 

In this blog we look at how technology can help future-proof the business against changing regulations, rather than just meeting a one-off need.

What do all these regulations mean?

Government regulation of industry can take many forms. In the supply chain world we are constantly grappling with directives aimed at improving working conditions and environmental sustainability.  

For example, the Fashion Sustainability and Social Accountability Act, or simply the “Fashion Act”, would require all large fashion companies that do business in New York to publicly disclose detailed information on their environmental, social and governance (ESG) work and associated risks in their value chain, including mapping of 50% of the supply chain and specific sustainability targets. Others, such as the UK Modern Slavery Act or Uyghur Forced Labor Act, focus on labour and working conditions and EU Due Diligence Act is aimed at protecting human rights and environmental standards.

Adding to the complexity is the scope of various regulations. Some are information-centric, such as the Fashion Act’s mandatory reporting, and others are people and process-centric, such as laws banning child labour, which unfortunately is still a problem in the global fashion supply chain. Regulations will also differ depending on the region you are operating in.

 

How changing regulations can impact supply chains

As we saw with severe disruptions due to the COVID-19 pandemic, enterprises globally must change their supply chain strategies to be more resilient, collaborative, and networked with customers and suppliers. This strategy includes becoming more responsive to changing regulatory requirements as well.

A simple regulatory change (like the Fashion Act) can directly impact business continuity if it is not prepared. This can result in a range of disruptions, including:

  • The inability to trade
  • Hefty fines
  • Product shortages
  • Reputation damage and customer resentment

The traditional reactionary approach to dealing with compliance is to “wait and see” which changes might arrive and how to adapt accordingly.

Most of today's supply chains were also not designed with fast-paced regulatory changes in mind and neither was technology. Most companies still rely on spreadsheets to collect and store supply chain data. With supply chains being as vast and complexed as they are, this is simply not feasible. The right supply chain technology needs to be scalable, automated and easy to use to keep up with the changing supply chain landscape.  

Leaders need a fresh approach.

How technology helps adapt to regulatory changes

We can’t predict the future when it comes to regulatory mandates, but we can structure supply chain processes to ensure we are monitoring and collecting the right data so the future is not such a shock.

Technology can help companies digitise, consolidate and visualise their vast amount of supply chain data and it is important to use the right tools to help automate, alert and identify risks. Not all technology is equal and some options, such as spreadsheets, are still very manual in practice needing human intervention in the process. 

This use of specialist technology extends to helping you meet regulatory requirements. For example, in the case of ESG, if a regulation demands more transparency, then you need to be able to trace your supplier data and monitor their credentials. The Fashion Act is an example of this, requiring the supply chain to be mapped. This can only be done efficiently with better access to data and timely information which can identify supply chain risks.

In addition to technology, developing a framework for managing regulatory risk is important to help you understand the breadth of your exposure and the likelihood of an event impacting your company’s supply chain.

Before diving in, business leaders need to be clear on requirements and identify that starting sooner helps put you in a better position for future regulatory changes.

 

How well do you know your supply chain? Reach out to us at Serai to schedule a chat and learn how we can help you gain valuable insights into your supply chain health and ensure it’s set up to go green the right way.

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