Compliance awareness and cooperation needs to be shifted from the tail end of goods movement to the front end…
Writing in Industry Week Magazine earlier this month, Jason Childers, a director of product engineering at CDC Software, made a persuasive case for what we have termed an “Integrated Trade Compliance Strategy” in an article entitled Compliance in a Complex Global Supply Chain World.
Childers frames his discussion by describing the growing complexity of today’s rapidly changing trade environment from the perspective of the typical supply chain executive engaged in global activity and suggests that “the proliferation of international regulatory trade requirements” resulting from the growing plethora of bilateral and multilateral trade agreements between countries should be a key focus today – even for those not working directly in a customs or compliance role.
Why? Well, aside from the obvious pecuniary consequences of non-compliance, Childers maintains that it “can have major impact on a company’s operating performance, reverberating deeply into an organization as well as broadly across collaborative supply lines.” The wider aspects of compliance risk elements such as changing classifications and tariffs not only impact total cost, but also have the ability to determine whether or not global sourcing decisions make economic sense.
It is inevitable that every enterprise involved in global trade will be audited, either by U.S. or European officials. Compliance departments are under pressure to accommodate the growing demands that will be put on their resources and personnel. They need to begin to collaborate more closely with both the manufacturing and supply chain/logistics functions in their companies. It will be important to reach even deeper to work with product design and development. Trade regulation compliance has not been a central concern for many of these other areas. Establishing greater cooperation with and visibility into these departments should be a top priority of compliance risk management.
In order to be effective and efficient, compliance awareness and cooperation needs to be shifted from the tail end of goods movement to the front end where designers and product planners specify materials and components. It should be expanded to include manufacturing, purchasing and supply chain/logistics. It should embrace sales and order management where shipment commitments are made.
Childers urges all companies to implement programs that: 1) shift compliance activities as far forward in the process as possible; 2) view compliance as a collaborative managed service to multiple areas of the organization; and 3) constantly monitor non-compliance, measuring it against industry best-practice indicators in order to drive improvements.