By David Parker
The global supply chain compliance landscape has changed dramatically over the last several years, with many companies facing heavy fines from non-compliance and delayed access to global markets due to difficult and complex international regulatory trade requirements, the increased pace of federal regulatory changes, changing trade agreements due to geopolitical reasons, and global logistics disruptions. The consequences of non-compliance are far-reaching in any organization, impacting company performance as well as supplier collaboration.
As you increase the visibility of your supply chain, it becomes easier to manage compliance risk and deal with these regulatory challenges. By using supply chain visibility to comply with ever-changing regulations and standards, you can improve both risk management and supply chain management, and can start to build solid strategies for compliance across all tiers in your supply chain.
Key Challenges for Supply Chain Compliance
There are several challenges for supply chains in terms of compliance issues, including:
- Supply chain complexity: Supply chains have become increasingly global, driven by a dramatic increase in the number of goods that can be sold worldwide. For products that have a high value relative to their shipping costs, it makes sense to manufacture them in a low-cost region and ship them back to the originating country. This shift to a global sourcing model allows them to take advantage of lower costs for labor, materials, facilities, etc. However, global companies that have complex supply chains are impacted by a volatile foreign exchange markets, as well as a reliance on supply chain partners and sub-suppliers, requiring strict governance up and down the chain. Another factor affecting the complexity of supply changes is the increased use of sub-suppliers, who in turn have their own network of suppliers. When faced with four to five tiers of suppliers, it becomes increasingly difficult to have visibility into all of these suppliers. The current COVID-19 pandemic has illustrated just how important it is to understand the sourcing chain and have multiple options in case a supplier is unable to deliver.
- Product complexity: There are an increasing number of types of products on the market, and these products often have short life cycles. The more complex a product, the greater the risk of disruption, since there are more parts in every product. Thus, companies that make complex products, such as those in the automotive industry, are more likely to experience supply chain disruptions and delays.
- Compliance measurement challenges: Global companies are continually challenged with meeting country-specific regulatory requirements. If found in non-compliance, they face fines, product returns, and customer issues, as well as the prospect of having to implement new tracking systems. Without automated metrics, it can be difficult to measure both regulatory compliance and supplier performance.
- Changes to regulations are occurring faster than ever before: New regulations are constantly being introduced, and supply chain compliance officers are stepping up their enforcement of regulation violations.
Increasing Supply Chain Visibility to Avoid Compliance Problems
For too long, supply chains have been governed by rigid, siloed data which is often out of date. They’ve been limited by broken communications between company functions and suppliers. To combat this, the first step is to determine how to digitize the entire supply chain process, which stretches out beyond the four walls to the entire network, including suppliers, manufacturing, packaging, and transportation.
Supply chain visibility can provide organizations with actionable intelligence to mitigate those risks. A supply chain visibility platform can create a digital twin of your supply chain, so that you know where all of your critical materials are at every stage of your product’s or asset’s life cycle. This approach protects both the organization, as well as the many partners and suppliers that are connected to that brand. By having one trusted source of information, you can prevent recalls, material loss, compliance infractions and maintain brand reputation.
How A Major Pharmaceutical Company Seamlessly Adheres to Regulatory Guidelines
Increased globalization and supply chain complexity pose significant risks, particularly to the pharmaceutical industry, where organizations often procure materials from several different countries, manufacture them in a different country, and even package them in yet another country. According to the FDA, about 80 percent of active pharmaceutical ingredients manufacturers are located outside of the U.S. In addition, the pharmaceutical industry operates in one of the world’s most regulated environments. It loses approximately $12B in revenue each year due to penalties and material waste.
To address these challenges, pharmaceutical companies are looking to increase visibility in their supply chains. For example, to avoid quality issues during the production or transportation of drugs, pharmaceutical industries are turning to supply chain visibility platforms to give them real-time control over the entire life cycle of a particular drug product, from production to delivery to its final destination.
To increase compliance with the FDA and decrease product waste, a leading biotech company is using supply chain visibility software to collect and transport time-sensitive biomedical material from donor centers to a manufacturing facility, where the raw bottles need to be moved to the freezer before experiencing temperature excursions. To ensure the safety and efficacy of the blood plasma, the company must comply with strict FDA regulations regarding the transportation of the samples. The company had lost millions of dollars every year due to plasma spoilage, re-testing, and waste.
The company adopted a supply chain visibility platform that gave them the ability to capture real-time product flow data within their plasma facility. The visibility solution included a software platform, 5,000 sensors and 60 gateways, and enabled the biotech company to accurately monitor the plasma samples’ location, dwell times, condition, and movement history, from the point when a truck pulls up to the receiving dock door to the end point when the final product is created. In addition, the company can provide the FDA with a complete digital record of plasma movement history. As a result, it has avoided compliance fines which cost millions of dollars for each infraction.
Using Cloudleaf to Improve Your Compliance Monitoring
Cloudleaf addresses the gap in supply chain visibility with an IoT-at-scale and AI solution that delivers continuous real-time visibility and insights into supply chain operations, using sensors, edge intelligence, and predictive cloud applications. Cloudleaf’s Digital Visibility Platform provides continuous, real-time information about the physical state of an organization’s supply chain at any moment in time. Hardware, connectivity and applications work in unison to provide organizations with intuitive dashboards that enable real-time inventory tracking and product movement history at a click of the button – displaying alerts, notifications, metrics, trends, analytics and KPIs to ensure accurate and fast regulatory reporting, resulting in significant administrative cost savings.
Reach out to Cloudleaf to find out how we can help you comply with regulations and get out in front of problems before they impact customers and your bottom line.