Supplier Compliance is Bigger Than You Think

If you're interested in the topic of supplier compliance, I'd suggest spending a few minutes and reading Michael Lamoureux's recent post on the subject. While his blog entry focuses primarily on the capabilities of Vendormate -- a relatively new vendor focusing on healthcare that I've written about in the past -- it's worth calling attention to the need for compliance outside of just the medical space specifically because procurement leaders don't think about it enough. To illustrate this point, one of Michael's readers points out in a comment that, "the health care world is probably unique in terms of compliance requirements. However, I'm not convinced that clients outside healthcare are as concerned about compliance as they are about price and quality."

Unfortunately, I'd agree that this type of thinking is still rampant in procurement organizations today. But I think this will change. And that's because the definition of what compliance actually is will expand. In the past, many have thought of supplier compliance as simply insuring that their supply base will adhere to general terms and conditions of the fine print of contracts such as the need to maintain certain professional certifications or insurance. But going forward, I believe that the whole compliance issue will become much larger.

For example, as a Big 5 colleague of mine who is expert in the subject recently pointed out (if anyone wants his contact details, let me know), the need to insure that a supplier's employees have the right working papers -- and are in fact not in the country illegally -- is becoming a huge deal, especially in the retail sector. This is one example that you'll be hearing quite a bit more about in the future as the Feds continue to clamp down on illegal workers. But the good news here is that through deploying the right processes and technology, it's possible to automate the administration of supplier compliance with Federal labor and employment practices. I'm hoping that this above-mentioned colleague will share his detailed thoughts on this topic at a future date on Spend Matters.

But besides the issue of domestic labor compliance, companies need to be more aware of the conditions and certifications of their suppliers in a global environment. I won't get into the now infamous Kathy-Lee sweat-shop example, but certainly supplier non-compliance can hurt a company's brand, even when its suppliers are on the other side of the world. In a similar regard, monitoring compliance to detect fraudulent certifications and statements also takes on a more important role when global suppliers are involved. For example, in some parts of the world, you can never be sure whether that ISO certification a supplier has provided is worth the paper it is printed on. Now, wouldn’t you agree that supplier compliance is bigger than you might have thought of in the past?

Jason Busch

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