Given the complexity of enterprise supply chains and the multitude of contractors, vendors, and logistics partners used throughout the process, there can be significant risks to companies from a lack of standards and protocols for accountability and compliance. Companies often do not hold anyone accountable for supply chain disruptions, which impact reaction time, profit margins, and customer lifetime value. Companies need to have proactive strategies, greater visibility, and stronger accountability levels to minimize these losses and transform supply chains to the level of agility and stability that they need to be. On their own, these strategies can take time to develop and are labor-intensive to track and monitor. With the help of a digital supply chain management platform, executives can now have real-time visibility, proactive alerts for any issues, and improved control over the entire process. Digital systems monitor all participants- whether contractor, vendor, or logistics partner- to ensure that contractually defined SLAs and performance targets are followed, certifications and audits are up to date, provide alerts in case of delays or any issues, and in the event of non-compliance, participants can take real-time actions to mitigate risk and financial loss.
The process of accountability begins during the supplier or logistics partner evaluation process. When vetting potential new vendors, it is important to have a setlist of standards that they meet. New vendors gain access to the supply chain platform to upload current certifications, internal sustainability initiatives, and audit reports. These documents are saved within a repository and vendor profile for future accessibility.
While the vendor management team is conducting due diligence and more in-depth evaluation, factories are rated for pre-defined parameters and standards, which will then inform the development of contractual SLAs.
Transparency and Traceability
Traceability and transparency are critical components of accountability to stakeholders and customers. Companies that invest in a supply chain compliance system can hold material suppliers accountable by tracking all components’ origin. This traceability level allows companies to measure sustainability and environmental standards, mitigate risks involved in the production of certain products, and then choose how and where to expose this information to internal and external stakeholders. This information will result in better cost controls and an increase in customer lifetime value.
Establishing Protocols and Controls
Accountability also requires the development of well-thought-out strategies for handling disruptions and other issues. It is essential to involve key players such as internal stakeholders, suppliers, and logistics partners to ensure that procedures and responses are clearly stated and are effective. Protocols and controls can vary between direct and indirect suppliers, so it is crucial to understand standard processes, defining parameters that can be monitored, identifying individuals within each organization responsible for specific functions, and standard timelines to be followed.
It is equally important to establish controls to have real-time supply chain tracking and proactive notifications in the event of non-conformity to parameters such as timelines, quality control inspections, and short shipment of orders.
Management of Non-Compliance
Supply chain executives can then react quickly to resolve such issues while maintaining original deadlines and cost control. Depending on the severity of the non-compliance, the supplier’s degree of culpability for the action, and the supplier’s commitment and capability to adjust and correct internal processes, suspension or exclusion of that supplier may be warranted.
When non-compliant suppliers are suspended, supply chain managers can then engage with them to develop, implement, and monitor a time-bound implementation plan to achieve compliance, including necessary remediation.
Supply Chain Optimization and Cost Controls
By generating reports that provide an audit trail and measure adherence to protocols and SLAs such as timelines, cost targets, and quality control, companies can then harness the data to optimize their vendor base further, supply chain operations, and processes. Implementation of contractual penalties for non-adherence to standards can help reduce costs for all functions: raw materials and components, manufacturing services, and logistics and transportation. This data is also helpful when negotiating contract renewals- the ability to implement better controls, financial penalties, and expanded SLAs will improve efficiencies, cost savings, service levels, and better production quality.