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Why Compliance is a Make or Break for Many Supply Chain Initiatives

Compliance can play an instrumental role in boosting consumer loyalty, increasing speed to market and mitigating rising costs—but only when it’s comprehensive and collaborative. Otherwise, it can be where brands and retailers lose money, time and shoppers. The challenge is understanding and meeting compliance standards that can feel like stumbling around in the dark—a fact that even the experts would admit.

Tobias Grabler, COO of compliance software firm Topo Solutions, acknowledges that navigating sourcing and production from a compliance standpoint can be intimidating. The key is transparency—and accurate data is the only way to achieve it, he says. Sourcing Journal spoke with Grabler about how what you don’t know about compliance—and what’s really happening beyond tier 1—could be causing more harm in your supply chain than you realize.

Sourcing Journal: What are the biggest issues you see with factories and mills related to compliance?

Tobias Grabler: Supply chains nowadays are highly complex and geographically scattered. This trend will only become stronger in the current political climate of an escalating trade war. However, supply chains are often not monitored tightly enough when it comes to compliance, and there is a general lack of end-to-end traceability. This is an issue that we are attempting to solve with our data-driven platform Topo.

SJ: What do brands and retailers need to better understand about the compliance process?

TG: Discussion and collaboration with other peers in associations, foundations or workgroups helps—those are necessary to set up common industry standards and benchmarks. Committing to compliance and sustainability movements is an important step in the right direction. Groups help brands and retailers share best practices and continuously improve industry standards, which is necessary to organize scattered supply chains.

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However, it is not enough—brands and retailers need to understand that they need to take full control of their data in order to monitor and maintain A to Z compliance. A suitable strategy to achieve this is to implement digital processes within the organizations to collect as much relevant data as possible in every step of their supply chain. Only then, full transparency and traceability will unfold and important insights into compliance processes can be gained.

SJ: In what ways are compliance issues hampering speed to market initiatives?

TG: Take for example a case where a product fails a lab test because a certain chemical substance exceeds the allowed limit. It can easily take a couple of days or even weeks to find the root cause and the responsible element in the supply chain to fix the problem—if that is even possible at this stage—and get the product shipped. This loss in time means higher inventory cost, higher markdowns and possibly disappointed consumers. The damage to brand image and profitability can be substantial.

Having full visibility about all product components, and second- and third-tier suppliers, is the key to reduce risk and quickly clean up the damage if it comes to it. If additional data from lab tests is taken into account, brands and retailers can take a much more proactive approach, even before any compliance issues arise. Topo’s digital data platform learns with every new data input through integrated artificial intelligence applications and keeps customers from making the same mistakes over and over again.

SJ: How have brands’ attitudes towards compliance changed, particularly in the last decade?

TG: Times have changed; brands and retailers have developed a much more conscious attitude towards compliance. The main reason is the increasing pressure from consumers, but also increasing transparency in the global supply chain, with many companies promoting values such as integrity and being a good corporate citizen as part of their brand strategy.

More and more consumers (in particular, millennials) want to know where and how the products they buy are manufactured. Social, environmental and product safety compliance has become a competitive advantage for brands and retailers in today’s world. Successful campaigns like “Detox My Fashion” by Greenpeace also contribute to this positive shift of taking a more responsible approach to consumption choices.

SJ: What are the best questions for brands and retailers to ask when vetting a mill or factory to avoid compliance issues down the road?

TG: Three simple but fundamental questions to start the compliance journey brands, retailers, factories and mills should ask their immediate suppliers are:

  1. What materials are used for each component of your products?
  2. Where do these materials come from?
  3. Is lab testing data available for these materials?

The answers to these questions are your starting point to quickly build up transparency along all tiers of your supply chain.