Managing compliance in your supply chain is perhaps one of the greatest modern business challenges. With complex multi-tiered and multinational supply chains, it is often a game of whack-a-mole to ensure your suppliers are compliant and up to par. To achieve compliance in your supply chain, there are no shortcuts. Relying on third-party audits can be expensive and risky and relying on supplier self-audits is very dangerous. As they say, if you want something done right, you need to do it yourself.
Two Examples of Supply Chain Challenges
No one has a bigger supply chain than Amazon and consequently, you can find a tonne of non-compliant products on their site. They will have to implement new and modern ways to ensure products are genuine and certified to the standards they claim to follow. Even in more “traditional” businesses such as automotive or oil & gas, we are talking about thousands of suppliers across dozens of countries.
I recall the story of a bolt failure on an oil rig in the Gulf of Mexico. After detailed analysis by the owner of the rig, it was determined that the bolt was six tiers down in their supply chain. How can you possibly manage six tiers?
The recently released RP75 standards from the American Petroleum Institute (API) will be extending the obligation to have a Safety and Environmental Management System (SEMS) program for all actors in the offshore Oil & Gas industry. For the Gulf of Mexico, this extends a SEMS obligation from the few hundred operators to the thousands of exploration companies, suppliers, service teams and other companies involved in the industry. This will be a huge challenge for the industry and a huge improvement for safety and security on rigs. This is part of a larger regulatory trend towards macro-ends based regulations, which we discussed in a recent webinar.
Tips and Tricks for Supply Chain Compliance
To achieve compliance in your supply chain you need to take a disciplined approach. Start by determining if there are industry standards you can lean on or use. This helps reduce the burden on suppliers who may be working with many different companies and who do not have the resources to track separate standards for each customer. If you can find an industry standard that meets your needs (ISO 14001, ISO 450001), then require your suppliers to follow-that.
It is then critical that you provide your suppliers with clear evaluation guidelines so they know how you will interpret the requirements within the standards. You should then follow-up with tools that will make compliance easy and allow suppliers to plan for audits and inspections. You can use a hybrid of self-audits by suppliers, 3rd party audits by certification companies and your own audits at your supplier location. Be careful to avoid audit fatigue and be sure to clearly communicate the value of these audits – they are not just extra paperwork, they are there to make products and protect the workers and the environment.