28 August 2014 | Crispin Mair
Starting operations in any emerging market is difficult.
From a supply chain perspective, it is imperative that organisations understand that success depends on more than merely addressing the physical challenges. Ensuring full traceability over all products and suppliers and meeting compliance laws is essential in building a sustainable and robust business that is secure from reputational or legal risk.
As regulations in each market vary, the ability to shed light on every stage of your supply chain to ensure that you are compliant is crucial. This has become even more important in light of recent industry scandals where companies have been blamed for dubious or illegal practices that have been occurring much further up the chain.
A recent report from the Chartered Institute of Purchasing & Supply (CIPS) has stated that generally British businesses are unaware of where products were sourced from with nearly three-quarters of the supply chain professionals surveyed admitting they had “zero visibility” over the early stages of their supply chains.
The findings from the CIPS report are very concerning. Events such as the horse meat scandal and prawn slavery incident suggest that while firms talk a good game when it comes to ensuring effective and ethical supply chains, the reality is very different.
Growth into and sourcing from emerging markets continues to be a key focus for organisations, and if carried out effectively it can significantly enhance both revenue and profit. In light of this, numerous factors need to be considered from a production, marketing and operations perspective.
Challenges of moving into a market include understanding new standards and regulations that need to be adhered to. The manufacturing and sourcing practices or technologies that are acceptable in one market might not be legal elsewhere. These can range from the headline grabbing use of child labour to the seemingly mundane technical restrictions such as which type of materials can be used in filters for the processing of liquid raw materials.
Organisations must ensure they know the local legislation, and they must be prepared to delve deeply into the production process and every single aspect of the supply chain to ensure they are legally compliant with their end market.
This also applies from the back end of the supply chain to the front; the manufacturing operations need to be aware of which materials, additives, processes and consumables are acceptable to which end markets, so that they don’t inadvertently end up creating products that cannot be flexibly deployed across their global markets.
Following this, firms should then decide whether to go beyond the standard regulations of a new market, so ensuring their ethical reputation stays intact. Regulatory compliance is a bare minimum and in some cases making an effort to understand your supply chain in real granular detail can highlight potential problems further down the line. Having the ability to identify and deal with these issues before they impact you and your end users is preferable to dealing with the aftermath of a major incident.
Firms need total traceability over their supply chain. In light of recent scandals, zero visibility is no longer an option, it’s imperative they have complete sight.
☛ Crispin Mair is director at Crimson & Co