When Policy and Supply Chain Traceability Requirements Do More Harm Than Good

Are we becoming a victim of our own supply chain policing, in that regulatory requirements are driving us to make sub-optimal decisions? In a must-read column in Sourcing Journal Online, Stephan Lamar, executive vice president at the American Apparel & Footwear Association (AAFA), presents the case for how the avoidance of one material in shoes and apparel led to potential non-compliance in another areas.

As he writes, “an effort several years ago to substitute lead (which triggered a number of product safety concerns even though the levels were very low) with other safe minerals led some companies to opt for tin (again in trace quantities). But tin now triggers compliance issues with the Dodd-Frank Conflict Minerals requirement (whereas lead doesn’t). Substituting the minerals ended up substituting one onerous regulation for another.”

There are no doubt other cases where supply chain traceability or materials usage/disclosure adherence and alterations based on one requirement could trigger risk or non-compliance in another. Moreover, since requirements can vary from country to country (and even on the state level in the US), certain initiatives in one location may actually have a negative effect in others.

These challenges point to the need for a common view of supplier activity and supply chain risk management. Individual, silo-based efforts (e.g., supply risk, supplier diversity, environmental health and safety (EHS), MSDS, materials choice/usage based on regulatory traceability and reporting requirements, etc.) are likely to sub-optimize overall outcomes for check the box requirements.

Which of course is why Spend Matters recommends a unified supplier management approach (supplier management, supplier information management, master data management, and information management) whenever possible. For further insight on the topic, read our research on supplier management.