Global Trade, Supply Risk, Compliance: Essentials Every Sourcing Practitioner Should Know (Part 3)

Click for the first and second posts in this series.

Perhaps the most fundamental opportunity (and challenge) around trade compliance, supply chain risk, and getting to the next level of analysis to avoid unnecessary costs and risk is collaboration. There is obviously "compliance departments are under pressure to accommodate the growing demands that will be put on their resources and personnel," as Childers suggests. But how they "begin to collaborate more closely with both the manufacturing and supply chain/logistics functions in their companies and "even reach even deeper to work with product design and development" is a challenge that only top performing companies have started to consistently and systematically address.

Here at Spend Matters, we'd posit the somewhat controversial view that what matters most in this case is not just moving to more a demand-driven collaborative approach as Childers hints at, but rather one where global sourcing and procurement teams orchestrate key activities rather than simply serving as just another collaboratively link between design/engineering, operations/supply chain, customs/compliance and EHS/HSE (environmental, health and safety). It's important to not just distill this down to a technology challenge and crappy global trade management and global trade management systems integrations/linkages as Childer's suggests (and which we'll get to a moment). Rather, we'd argue the problem is larger and stewardship -- really a lack of stewardship -- and the failure of procurement to step up to the table is really the more central challenge at the core.

In our own research of over twenty practitioners in global supplier and materials compliance (conducted in the second half of 2011), we found a number of central challenges that go beyond systems and point rather to a lack of leadership, stewardship, orchestration and content visibility in the global direct materials supply chain. Our research found, for example, a frequent emphasis on the need for multi-tier visibility into the supplier chain, yet a lack of general multi-tier programs and program design in place.

Moreover, there was not a single version of data truth in companies despite the fact that our research participants cited the centralization of data and process stewardship/control as critical (i.e., single version of truth), despite the challenges trying to achieve it. Another finding, perhaps one Childers would agree with, is that companies generally have a really difficult time aggregating data in terms of traceability and classification. And what they do create "becomes a useless storyboard" that "can't be acted on" in too many cases even when intelligence does surface.

Stay tuned as we conclude our analysis -- and hint at why global trade management systems alone are only a tiny percentage of the answer to the compliance challenge.

- Jason Busch

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