Aug 1, 2024
The Importance of Supply Chain Visibility in 2024
We’ve reached a tipping point: supply chain visibility is no longer a nice to have. It’s a must.
Already, organizations importing goods into Canada and United States need to understand whether there is forced labor in their supply chain. By the end of this year, organizations must have deep insight into their supply chains to comply with the terms of the EU’s Deforestation Regulation (EUDR). Soon, a supply chain map will need to accompany every shipment that enters the EU. By 2026, the new US Customs portal will be active, and by 2027, the Corporate Sustainability Due Diligence Directive (CSDDD) will go into effect.
Complying with the laws requiring visibility into supply chains isn’t easy. Supply chain maps can’t be a shallow evaluation of tier 1 suppliers only. Regulators expect your organization to have a fully vetted chain of custody down to the N tier of suppliers.
Here’s why supply chain visibility matters more than ever — and how you can achieve it.
What is supply chain visibility?
Supply chain visibility is your business’s ability to track and monitor all components of your supply chain in real time. This includes the movement of raw materials and components from the point of origin through the various stages of production before they reach the final manufacturing phase.
With detailed knowledge of your upstream supply chain, you can ensure that suppliers adhere to ethical practices and regulatory standards, thereby mitigating risks associated with illegal or unethical activities. Visibility is crucial for ensuring compliance with global regulations governing forced labor, sustainability, and deforestation. Keep in mind that any product found to violate these regulations can be detained, leading to business losses, severe fines and penalties, and reputational damage.
Why does supply chain visibility matter?
The comprehensive oversight that supply chain visibility affords ensures that all parts, materials, and products are compliant with global laws and regulations aimed at combating human and environmental abuses. These laws mandate reporting and transparency in supply chains.
In the United States, the focus on supply chain visibility has intensified with updates to the forced labor ban. Originally targeting specific commodities like cotton, tomatoes, and solar panels, the ban now encompasses a broader range of industries, including seafood, aluminum, and footwear. This shift underscores how important it is to procure detailed, real-time knowledge of your supply chains to avoid detentions and ensure compliance.
But forced labor isn’t the only reason to focus on compliance. Sustainability initiatives coming into effect around the globe also mandate that organizations understand whether they are sourcing materials from lands that have damaged the environment. For example, under the EUDR, products will not be allowed to enter the EU unless accompanied by a supply chain map. What should concern your company even more is that when EU regulators investigate companies for accusations of problems in their supply chain, they publicly share information about their investigation, which can seriously damage your company’s reputation.
Given these regulatory developments, companies will increasingly study who they do business with as well. In a resource-constrained global economy, you must understand the risks of doing business with certain suppliers. As we discussed in a recent webinar, businesses are also starting to build supply chain mapping into their vendor qualification process.
In short, as compliance and consumer expectations rise on both sides of the Atlantic, you need to proactively map and trace your company’s supply chain.
How can technology increase visibility into your supply chain?
Supply chain visibility is no longer a once-a-year or optional exercise for reporting purposes. As global regulations become more stringent and consumers demand greater transparency, ongoing supply chain visibility is a necessity for competitive, sustainable, and ethical business practices. Moreover, government agencies are also adopting technology to digest supply chain maps and related data.
Investing in supply chain mapping and traceability technology is essential for modern businesses to comply with regulatory requirements and manage risk. These tools offer real-time visibility so businesses can track the movement of goods from raw materials to finished products. Advanced supply chain management tools provide detailed records of every transaction, providing verifiable documentation of ethical sourcing and production practices.
What steps should you take to get the visibility you need?
Start working with your suppliers now to ensure they understand their obligations. The purpose of this supplier engagement initiative should be to determine whether they have the tools to perform traceability to the necessary and whether they are collecting the right documents.
If you have a composite product where you blend materials together, separate each raw material and trace it back to its source. Begin this process now so you have it in place before even more serious ramifications apply.
Look for supply chain tools that offer real-time visibility and traceability. Sourcemap’s supply chain mapping technology can help you document the origin of raw materials and trace their journey through your supply chain, assessing their human and environmental impact and ensuring compliance with labor and sustainability regulations.
