4 Critical Aspects of Global Trade Compliance in Supply Chain Management

The term “compliance” gets thrown around often in the supply chain management world. However, few entities take the time to understand how global trade compliance affects daily operations. Compliance to the rules and regulations in one area can vary dramatically from compliance to local statutes in another. Unfortunately, globalization within the supply chain world has led to even more complex and intrinsic factors to consider in global trade compliance. Ultimately, ensuring compliance to all rules and regulations is inherently near-impossible; however, it must be present in all aspects of supply chain management. The US Department of Justice assessed more than $1.5 billion to violations of US rules and regulations in 2014, and one company felt the impact of a $773 million penalty. Maintaining compliance should focus on four critical aspects of supply chain management.

Trade Compliance

International Trade

As the supply chain has grown, so too have the opportunities for mistakes when the supply chain crosses international borders. Prior to engaging in international trade, supply chain management entities must ensure all processes meet, if not exceed, the expectations of all political, geographic areas. This requires extensive research and monitoring of political climates across a global scale. Unfortunately, small to medium, if not some large, businesses rarely have the resources necessary to ensure adherence to international trade laws. Furthermore, political actions in one country can directly impact how business is conducted with another country. For example, the recent Trans-Pacific Partnership has serious implications for reducing the reshoring efforts of many manufacturers. However, manufacturers can also reap the rewards in the form of tax breaks by continuing reshoring of manufacturing processes. Supply chain management providers have extensive resources devoted to the sole monitoring of and ensuring adherence to international trade rules and regulations, which includes payment of duties, tariffs, and taxes.

Consistent Monitoring of Processes for Effective Global Trade Compliance

Modern marvels of technological advancement have resulted in a “figurative” Mount Olympus of available data on supply chain processes. However, this large amount of data, otherwise known as ‘Big Data,” has no use if not analyzed and applied to supply chain processes. As a result, supply chain managers must ensure collected data does not become an endless, useless, and space-craving storage nightmare. When data is collected, it has the potential to result in positive adaptation to global trade compliance and local political climates. Some companies have taken steps to begin the analysis of such data, but true beneficial analysis should result in some sort of automation, at least in the notification, of supply chain processes.

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Optimum Levels of Supply Chain Visibility

Visibility is another popular, tossed around word found within the supply chain world. However, visibility does not simply mean making the information about supply chain processes available; it means making it available and announcing this availability. Modernity has given birth to a society flooded with information, and most consumers, as well as respective businesses within the supply chain, do not have the time, or resources, necessary to go out and look for this information without notification. Furthermore, visibility enables the rapid identification of inefficiencies, or deviations from global trade compliance regulations. These problems and deviations must be reported as defined by the respective governments. Attempting to cover up such issues can result in more stiff fines from the US Department of Justice, other governments, and consumers in the form of requested refunds. Unfortunately, these problems can be the determining factor between the success and overnight failure of a business. Fortunately, Supply Chain Management providers (SCMs) have extensive experience in the arena of visibility, but the benefits of employing SCM for global trade compliance extends beyond this fact. When an SCM provider fails to provide the accountability of visibility, it eliminates the possibility for fines and penalties for the SCM’s business partners. As a result, businesses have a greater level of protection against possible compliance violations for visibility when an SCM provider has been selected and used.

Implementation of Automation

Automation can to the use of the IoT for ensuring the constant monitoring of Key Performance Indicators (KPIs). However, automation can also apply to aspects of the supply chain where automation of processes has been implemented. Recently, Amazon held an open contest in an attempt to create a more automated order fulfillment process for consumers. The rumors of delivery of product within two hours of order by drone have also been a focal point of Amazon’s commitment to achieving a high level of automation in its processes. From a business perspective, automation allows workers to maintain more productive workdays and meet the needs of the physical, human-input-required processes.

SCM providers often employ dashboards, automated notification systems, electronic transmission of data, and other tech resources to reduce the amount of human-input in simple processes. However, automation poses another benefit to organization: it eliminates the potential for human error within processes. Since automation relies on computer analytics and systems to trigger activities, by nature, it has a lower potential for creating a global trade compliance violation. When a violation does occur, it can identify the issue and assign a specific set of processes and tasks to remove the possible violation before it transcends into a penalty and fine.

Throughout the supply chain, global trade compliance is law. Compliance defines ethical and unethical business practices, and it ensures SCM providers do not violate standards for processes. By understanding how these four areas of global trade compliance affect the supply chain, the risk for compliance violations is mitigated, and the goal of the supply chain—delivering a superior product on a superior schedule without problems—is maintained.