4 Barriers to Supplier Compliance

Published
February 2017

Measuring apparel and footwear supplier’s compliance with your company’s and international rules and regulations is vital to ensuring a highly functioning supplier process and your company’s competitive position. Supplier compliance inspections help improve key suppliers’ performance and adherence to rules and also help you identify avenues for improvement.

Non-compliance is costly, in particular through unauthorized billings, pricing errors, missed discounts, changing global market conditions, and more, making supplier compliance inspections mandatory. But there are 4 key barriers that can impede your ability to monitor supplier contract compliance.

Manual processes or systems that don’t talk

Relying on manual processes or disparate systems that don’t share information between them can make it difficult, if not impossible, to pull all of the information necessary to perform a compliance review. This can lead to human error or oversight, which will obscure the real results of a compliance inspection.

Automating your compliance inspection process on a single, integrated platform designed for the apparel and footwear industry can greatly help to alleviate these problems.

Inconsistency across suppliers

Many apparel and footwear companies have countless suppliers around the world, which can often leave you open to noncompliance issues because a lack of consistency makes it difficult to evaluate suppliers. Noncompliance can crop up through multiple currencies, different duplicated vendor bases, and varied regulatory environments.

A global audit covering an end-to-end inspection of your suppliers’ processes and procedures can help you identify areas of noncompliance. Again, this is better handled through an apparel and footwear industry inspection platform based on cutting-edge technology to help you manage suppliers.

Supplier master database problems

If you work with thousands of apparel and footwear suppliers, keeping your master database up to date and clean can be challenging. Disorganization or redundancies can lead to duplications of payments and more.

Use advanced technology to help you cleanse and monitor your supplier records can help you mitigate the risk of noncompliance. When your master database is in order, you’ll eliminate duplicate records and inconsistencies, which can lead to better payment-term optimization and supplier-initiated discounts.

Compliance inspection myths

Some executives believe that if you don’t have a compliance audit included in your apparel and footwear vendor contract that you don’t have the authority to perform one. Don’t let this falsehood keep you from requesting an inspection. While it’s advisable to have a well-crafted clause in your contract, not having one doesn’t eliminate your ability to perform a review. Most suppliers value your relationship and want to prove their transparency and will welcome a compliance audit.

Also, there is the belief that to resolve any findings in a compliance review will require legal action. In fact, most are resolved through a negotiated settlement that benefits both parties. And a resolution leads to a better company-supplier relationship based on improvements made and contract clarifications to keep you both aligned in the future.

Conclusion

In the apparel and footwear industry, it’s best to prepare to overcome these barriers from the beginning. When you tackle these issues at an early stage, you’re setting up a process that will provide significant benefits in future operations and compliance. Each side will understand what is expected and how to resolve issues, creating a stronger company-supplier relationship that leads to quality and compliance improvements that can an effect on your bottom line.

You’ll also mitigate the risk of wasteful monetary leakage by building stronger contracts with apparel and footwear vendors that fully express your expectations and requirements. This helps to build compliance into your suppliers’ process.

Finally, performing a compliance inspection can be challenging, if you don’t have the right tools. Manual approaches are inadequate and unable to provide the insight you need to make better decision and improve supplier performance. Using technology designed specifically for the apparel and footwear industry to manage all of your suppliers’ compliance can help you see as much as a 20% improvement in supplier performance metrics like on-time delivery, quality, and cost (Source: 91st Annual International Supply Management Conference speaker Sherry R. Gordon).