How Compliance is Disrupting the Global Supply Chain and What Importers Must Do to Overcome It
The fragility of the global supply chain has been exposed: The one most critical step causing further damage to an already weakened industry? Compliance. Here's what importers must do to regain confidence.
The global supply chain is having its long-awaited moment in the spotlight — albeit for all the wrong reasons. Once a conversation stopper at cocktail parties, the topic has become the talk of every newsreader (and kitchen table) since the pandemic began over two years ago.
Supply chain disasters have seemingly occurred one after the other ever since — from the blockage in the Suez Canal to panicked toilet roll purchases and, most recently, the invasion of Ukraine by Russian forces affecting oil, gas and food markets in equal measure.
After years of stability, consumers have to face the reality that certain goods may not arrive on their doorstep overnight or at any time in the near future. However, alongside the inevitable feelings of frustration and dismay, the world is slowly waking up to the reality of the distance, dollar and effort that goes into the delivery of products we know and love. And not a moment too soon.
Exposing the fragility of the global supply chain
The outcome of the past few years has been to expose the numerous fragilities in the way the international supply chain has organically grown, much of which has changed little since its flourishing in the late 1950s. Amongst these challenges is one that has been ignored for years yet is set to cause further damage to an already weakened industry: compliance.
Those in the global trade industry typically group compliance into three areas:
1. Social compliance: The people, communities and environment affected by the actions of a company.
2. Regulatory compliance: Standards set out by governmental bodies to govern the supply chain.
3. Supply chain compliance: The internal aspects of the supply chain that are affected during the buying, planning and moving of goods (such as labeling requirements and packing instructions).
How compliance is disrupting the global supply chain
But why now? Why has compliance suddenly gone from being an underrated after-thought to a business-critical concern? The answer lies in the convergence of three main areas.
First off, there's growing consumer demand for more ethical and environmentally aware brands. A 2019 survey found that 81% of consumers globally expect companies to be environmentally aware and will happily switch to alternative brands.
Second, there has been a notable market shift in investment toward brands that show greater longevity and long-term value through areas such as enhanced environmental, social and governance (ESG) standards and sustainable business plans.
And finally, governments (most notably in the West) have started to implement stringent laws to tackle malpractice and address key areas of the supply chain that, in some cases, have gone untouched for decades.
A recent example has been the launch of the Uyghur Forced Labor Prevention Act (UFLPA) — a new regulation to prevent goods being imported into the U.S. that have allegedly been made using forced labor in the Xinjiang Uyghur Autonomous Regions (XUAR) in China.
The result of these converging scenarios has seen businesses scramble to re-shape the way their supply chains are structured amid the shifting landscape — starting with the people who make and move their products.
Where importers are going wrong
Every good relationship begins with trust. For years, suppliers (often based thousands of miles away) were viewed as disposable by Western importers. However, they critically underpin an importing business' ability to buy, move and sell products — both in-store and online.
To manage and maintain those relationships, brands have relied on manual processes to measure and mandate suppliers to abide by certain standards across social, regulatory and supply chain compliance.
Spreadsheets, documents and email have become the tools of choice to dictate the success of a $2.5T industry. Yet it's these same archaic methods and reliance on vendor relationships that have the ability to make or erode the trust and resilience consumers have in an importer.
What importers must do to regain compliance confidence
There are two areas that every importer must address to regain their compliance confidence: Firstly, their operational processes and ways of working. Secondly, their technological ability to deliver on those processes.
One of the first major innovations in the supply chain was introduced back in 1985 with the release of Microsoft Excel. Since its inception, spreadsheet software (alongside email) has become the default tool of choice for importers, with the majority of international brands still using the software to manage their entire international supply chain.
Yet these tools act as independent silos as they are not connected to a shared business tech stack. This can have a dramatic effect on a brand's ability to implement, track and measure compliance, often extending to their suppliers and partners.
One immediate solution for importers is to invest in modernizing supply chain ecosystems. Today, purpose-built, cloud-based digital technologies can quickly adapt to the complexity of modern supply chains — delivering amazing outcomes. When verifying that suppliers meet required standards, importers can also educate their supplier partners on best practices, new regulations and ensure continuous engagement through connected systems.
Compliance should be viewed as a fundamental part of day-to-day operations. With a few key investments, importers can not only ensure compliance but also enhance employee happiness and minimize future disruptions.
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