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Building a culture of compliance helps improve efficiency in supply chain management.

Staying Abreast of Supply Chain Regulations WorldwideARTICLE

By Christine Parizo

The supply chain is an intricate global web of interdependent processes — and that means supply chain management professionals may need to be aware of an equally complex set of local, national and international regulations. In supply chain management, it’s not enough to know the companies involved in the supply chain; it also may be critical to know the laws and governing bodies that regulate the movement of goods and materials, and to understand the associated compliance and disclosure requirements. This includes regulations that are currently in development and likely to come into effect in the future.

Supply Chain Management Requirements for Preventing Human Trafficking

Recently enacted and proposed legislation in several countries focuses on preventing human trafficking, a term that covers various forms of exploitation including forced labour.1 In the U.K., the U.K. Modern Slavery Act of 2015 (U.K. Act) requires companies to make annual disclosure statements regarding slavery and human trafficking on their websites. Companies that do business in the U.K. need to detail the steps they take to ensure human trafficking and slavery are not part of their supply chains and post that as part of the disclosure. 2,3

In the U.S., legislation exists at state and Federal level. A key example is the California Transparency in Supply Chains Act, enacted in 2012, which is somewhat like the U.K. Act but applies to a narrower range of businesses. It requires large retailers and manufacturers headquartered or doing business in the state to disclose their initiatives to eradicate slavery and human trafficking from their direct supply chains.4,5 Subsequently, the Federal Acquisition Regulatory Council published detailed rules in January 2015 to strengthen protections against trafficking in federal contracts. These provisions require that any company doing business with the government, among other things, report suspected human trafficking and cooperate with investigating law enforcement agencies.6

Restricting Hazardous Substances and Conflict Minerals

For companies that sell products within the EU, strict regulations apply to the use of hazardous substances. The Restriction of Hazardous Substances (RoHS) act restricts the use in electronics and electrical equipment of metals including lead, mercury, cadmium, hexavalent chromium, and chemicals including polybrominated biphenyls, polybrominated diphenyl ethers, and phthalates in electronics and electrical equipment.7 In the U.S., several states have enacted or proposed similar legislation. Some substances, such as lead, are also regulated at the federal level.8

Other key EU regulations include Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), which applies to companies manufacturing chemicals or importing them into the EU and requires companies to register chemical substances.9

In the U.S., the Dodd-Frank Act regulates the use of “conflict minerals” including tantalum, tin, gold, and tungsten. Companies must be able to prove these minerals did not originate in the Democratic Republic of Congo or certain other countries. The rule applies to companies that file reports with the U.S. Securities and Exchange Commission under the Exchange Act.10

Complying with Recordkeeping Requirements

Different regulatory bodies also have stringent reporting and recordkeeping provisions to ensure safety and compliance in the supply chain. The U.K. Food Standards Agency requires companies to be able to trace internal production history, as well as supplier and customer information, for example.11

Building a Culture of Compliance for Supply Chain Management

Supply chain management technology may help companies stay abreast of new regulations, but some experts say that it’s also important to develop a “culture of compliance” to ensure the internal process rigor required to avoid falling foul of regulations. 12

Some experts advocate Master Data Management (MDM) as a foundation for supply chain management applications, due to the ability to create a single view of consolidated product, raw material, and supplier data to support supply chain traceability efforts.13

The Takeaway

As new regulations continue to emerge and come into force, it becomes more challenging to ensure compliance throughout the supply chain. Supply chain management technology can help, but a culture of compliance may also be critical.

Christine Parazio - The Author

The Author

Christine Parizo

Christine Parizo is a professional writer specializing in business and technology. She's written for a variety of TechTarget sites, including searchSAP.com, searchSOA.com, and searchCloudApplications.com, as well as HPE's Infrastructure Insights and The Pulse of IT.

Sources

1. “Human Trafficking”,U.N. Office on Drugs and Crime; https://www.unodc.org/unodc/en/human-trafficking/what-is-human-trafficking.html
2. "UK Modern Slavery Act 2015",U.K. Government; http://www.legislation.gov.uk/ukpga/2015/30/part/6
3. "U.K. Modern Slavery Act: New Disclosure Requirements for Companies Operating in the United Kingdom",Corporate Social Responsibility and the Law; http://www.csrandthelaw.com/2015/08/18/u-k-modern-slavery-act-new-disclosure-requirements-for-companies-operating-in-the-united-kingdom/
4. California Transparency in Supply Chains Act, Senate Bill No. 657. Cal. Civ. Code §1714.13.http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0651-0700/sb_657_bill_20100930_chaptered.pdf
5. "California Transparency in Supply Chains",U.S. Department of Labor Bureau of International Labor Affairs; https://www.dol.gov/ilab/child-forced-labor/California-Transparency-in-Supply-Chains-Act.htm
6. Federal Acquisition Regulatory Council, Subpart 22.17, Combating Trafficking in Persons.https://www.acquisition.gov/far/current/html/Subpart%2022_17.html
7. "RoHS Compliance FAQ",RoHS Guide; http://www.rohsguide.com/rohs-faq.htm
8. "Lead Regulations", U.S. Environmental Protection Agency; https://www.epa.gov/lead/lead-regulations
9. REACH, European Chemicals Agency; https://echa.europa.eu/regulations/reach
10. "Fact Sheet: Disclosing the Use of Conflict Minerals", U.S. Securities and Exchange Commission; https://www.sec.gov/News/Article/Detail/Article/1365171562058
11. "Components of traceability";, U.K. Food Standards Agency; http://traceabilitytraining.food.gov.uk/module1/overview_6.html#.WH_qLFPaeUk
12. "The ABCs of Supply Chain Compliance"Inbound Logistics; April 2016. http://www.inboundlogistics.com/cms/article/the-abcs-of-supply-chain-compliance/
13. "How the Easter Bunny Ensures Supply Chain Traceability", ComputerWorld; http://www.computerworld.com/article/3048513/data-analytics/how-the-easter-bunny-ensures-supply-chain-traceability.html

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