(Sponsored) Today’s ever-changing regulatory landscape presents a real challenge for supply chain professionals looking to ensure compliance while keeping costs in check. Compliance programs are composed of many people, tools and processes, and it is crucial that organizations allocate these resources carefully to maintain smooth operations. Assent’s Cally Edgren explores key considerations for keeping programs on the right financial path.
Let’s explore how you can develop a proactive compliance strategy tailored to your organization’s specific supply chain sustainability needs and goals.
Compliance activities to include in your budget
To ensure the people, tools and processes that make up your compliance program can perform at their best, you need to invest significant amounts of time, money and other resources. Don’t overlook these considerations when planning your budget:
When regulatory pressure rises, some manufacturers choose to hire full-time employees (FTEs) for their compliance teams. However, over-reliance on hiring additional staff is usually a symptom of manual or inefficient processes. For example, manually reaching out to suppliers via personal email or telephone becomes less effective as regulations get more complex. It’s more cost-effective to invest in an automated solution for supply chain sustainability management that empowers your existing team to keep up with reporting and data requirements without the extra work.
Here are some of the costs associated with hiring more team members:
- Annual salary plus benefits
- Time investment to hire and interview
- Onboarding time — a new employee can take several months to get up to speed
- Regulatory training — on top of onboarding, it can take months for a new team member to understand the nuances of a regulation.
Most manufacturers don’t have an in-house regulatory expert dedicated to research and risk mitigation activities. This means you’ll likely need to invest money into one of three categories of regulatory monitoring support:
- Consultants — they’ll evaluate your current requirements and even help you plan for near-term updates. However, consultants are costly and provide a point solution, and costs add up if you’re in scope of multiple regulations or when rules update.
- Subscriptions to regulatory databases — you can access paid or free databases for regulatory information, receiving updates directly in your inbox. However, this still requires your team to spend time deciphering the impact and application of these updates. Additionally, subscriptions may not provide a long-term outlook.
- Proactive compliance platform — a third-party solution, like Assent’s proactive compliance platform, may include proactive regulatory upkeep as part of the overall solution. By taking advantage of economies of scale, you pay less for change management and program updates for certain regulations, like the U.S. Toxic Substances Control Act (TSCA).
In addition to ensuring your processes keep up with regulatory changes, you also need to educate your suppliers when data requirements change. You might need to budget a staff member’s time for supplier education, pulling them away from other business-critical projects. An alternative is to use an already-built proactive solution that includes supplier training services. For example, Assent provides supplier training services plus access to online training courses in multiple languages as part of our solution.
Building internal systems
Once manual compliance efforts become too costly or difficult to scale, some companies build internal technological systems to manage supply chain sustainability data. These systems can be customized to specific business requirements and centralize compliance resources. Before you decide to go this route, keep these budgeting considerations in mind:
- It typically takes a year or more for design, testing and implementation, so design your internal system with future requirements in mind. Otherwise, it could be obsolete by the time you start using it.
- You should account for consulting and developer costs.
- Ensuring compliance with the ever-changing regulatory landscape may require coding in new requirements, which also incur costs.
- Ongoing maintenance is crucial; it includes aspects like technical support and upgrades, as well as regulatory consulting.
A more proactive strategy is to implement a third-party compliance solution, configured to match your specific regulatory requirements and sustainability goals. Third-party technology is developed at scale, so it is often more cost-effective than in-house development and faster to implement.
When solving for individual regulations or specific customer requests for supply chain data, be aware that point solutions, such as software designed only for the EU’s Registration, Evaluation, Authorization and Restrictions of Chemicals (REACH) Regulation, are less cost-effective in the long run. Many regulations rely on the same supply chain data, so having a system that collects comprehensive, reliable data with multiple uses increases efficiency. In addition, using multiple solutions increases supplier fatigue.
(Sponsored) To address regulatory and consumer demand for removal of so-called “forever chemicals,” companies will need to address parts obsolescence. As Assent’s Cally Edgren explains, this is easier said than done, but make no mistake: Avoiding supply chain disruption means acting early.Read more
Getting C-suite buy-in
All your budget planning efforts are wasted if you don’t secure executive buy-in for your plans, especially if you’re asking for resources to scale up your compliance activities. Here are some tips to help get your leadership team on board:
- Find an executive sponsor: Find an advocate who can influence cross-department budget sharing and communicate with C-suite executives.
- Compliance covers many departments (product compliance, risk management, procurement, engineering, quality, etc.), so find value beyond your own team. For example, how many hours can you save your legal team? How can procurement use your supply chain risk data?
- Focus on cost reductions. Executives are more concerned with how your activities reduce costs rather than spending more on compliance. For example, how will your new system speed up processes?
- Communicate the cost of being reactive: what risks will your plans mitigate? What are the regulatory fines you are trying to avoid? Have any customers or investors made specific compliance demands? A 2020 study by GreenBiz Group Inc. found that 83% of executives for large multinational companies see their sustainability strategies impacting corporate revenues and profits.
For supply chain professionals, effective budgeting for compliance activities is a strategic imperative. By carefully considering team dynamics, regulatory monitoring, supplier education, technology solutions, and obtaining C-suite buy-in, organizations can optimize their compliance programs and ensure long-term success in a dynamic regulatory environment. Embracing cost-effective and efficient compliance practices is not just about adhering to regulations but also about laying the foundation for sustainable growth and profitability.
Assent’s annual eBook, Budgeting for Compliance: Proactive Compliance in 2024, is out now with regulatory deep dives and cost-saving measures for 2024. Download it today to start planning your compliance budget.