There are many unique disciplines within supply chain management, each having their own challenges and requirements. One discipline in particular that has always been important, but is even more so today in light of current world events and new regulations (either in place or forthcoming), is supply chain compliance and transparency. What is this all about? Why is it getting more important? Who is looking for greater transparency? And how can technology help? Those are the main questions I discussed with Jackson Wood, Director, Industry Strategy, Global Trade Intelligence at Descartes, in a recent episode of Talking Logistics.
The Hidden Side of Supply Chain
When most people think of supply chain, they think of trucks or trains or ships bringing products to customers. But there is another “hidden” side of the supply chain that is equally important in ensuring products can move from point A to point B—Supply Chain Compliance. I asked Jackson to elaborate.
“We talk about supply chain compliance and risk management in basic terms,” says Jackson. “Are you doing business with third parties, whether that’s suppliers, customers or intermediaries, who you can do business with, and what’s becoming a bigger part of the equation, who you should do business with too. Think of it as dotting the i’s and crossing the t’s from a regulatory, risk management, and image and reputation perspective.
“For example, a number of companies have ‘self sanctioned’ and stopped doing business in Russia right now not because it’s illegal, but because their customers or other stakeholders are not willing to take the risk of being associated with doing business in a sensitive geopolitical region. Companies are also thinking about risk management in regards to supply chain resiliency.
“It’s also interesting to me to see the transition of the compliance function, particularly since the pandemic, from a ‘necessary evil’ to a realization of their value as strategic analysts who can help their companies look at their business in new ways. I think we’re seeing a Renaissance of this function.”
The Growing Complexity of Compliance
I next asked Jackson to explain the growth in complexity of the compliance challenge. He notes that the Russian-Ukraine conflict has brought into sharp focus, if the pandemic didn’t, how quickly situations can change in the compliance world. “Compliance has always been complicated, but what has changed over the past 4-5 years is the rate and scope of change,” he says.
“Compliance used to be an essentially linear process of cross-referencing products and shipments with published prohibited lists. Now, in the case of new sanctions on Russian oligarchs, for example, you have to make sure you are not doing business with any company that is at least 50% owned by these individuals, which is not on any list. It’s now a much more complex task of trying to disentangle these ownership structures of international organizations. The burden on companies to do this due diligence is huge.”
Technology + Content
I asked Jackson how technology can help, but he quickly pointed out that besides technology, companies need the content he just discussed to tackle these issues. “Our focus is on delivering the right technology plus the right data so our customers can make those optimal business decisions,” Jackson states.
Jackson comments that there are still a lot of companies of all sizes who are doing tasks such as denied-party screenings manually or with spreadsheets. “There are mature systems available that automate those tasks, as well as consolidate content from multiple sources and integrate it with internal systems such as an ERP or CRM to automate the entire workflow with no human interaction. The automation is simple. The sophistication comes in the search engine that gathers and evaluates the information from many sources. The amount of data is massive. The potential is huge for Artificial Intelligence and machine learning to aggregate and leverage the data to make the best possible decisions for their business.”
What’s Coming Next in Compliance?
I finished our discussion by asking Jackson what is coming next in the compliance field that companies should be aware of and planning for. He had many insights on emerging requirements such as ESG (Environmental, Social, and Governance). Therefore, I encourage you to watch the full episode for all of his insights and advice on everything we discussed. Then keep the conversation going by posting a comment and sharing your own perspective and experience on this topic.