Do you know where your supply chain was last night?

Brad Brooks //June 28, 2013//

Do you know where your supply chain was last night?

Brad Brooks //June 28, 2013//

This may sound like a silly question, but if you don’t think of your supply chain and all it means for your company—both the opportunities and the trouble it can bring—as a living, breathing entity, then you are likely to get an unwelcome answer.

If we translate this question into the reality of your business, it may look more like this:  do you know the complete details of who your suppliers and customers are?  Do you understand the full range of components, services and technology incorporated into your business?  Do you truly understand how much your inputs cost you?  Do your policies, procedures and audits really get at these questions, and the dozens more like them?

If not, then you may not know what your supply chain did—and did to you—last night.

As a result, you may be missing key business opportunities where you can maximize value and efficiency. You may also be unwittingly inviting scrutiny from U.S. or foreign government regulators, from shareholders or from a bottom line that is incurring unnecessary costs and even penalties.

Here are some of the challenges facing your supply shain:

  • Sanctions. The Treasury Department’s Office of Foreign Assets Control implements a wide array of economic sanctions. These sanctions not only prevent business with “bad guys” like terrorists, but also cover an increasingly complex set of transactions involving Iran and its activities around the world, as well as specific types of transactions involving Cuba, Sudan, Burma, Syria, Belarus, Zimbabwe and many others. For most sanctions programs, civil penalties can range up to $250,000 per violation or twice the amount of the underlying transaction; criminal penalties include $1 million in fines or 20 years in prison.  
  • Export licensing. The State Department’s Office of Defense Trade Controls and Commerce Department’s Bureau of Industry and Security manage extensive programs that determine when licenses are needed to export military-specific items, technology and services (State) or dual-use items that are sensitive but could have military or civilian purposes (Commerce). Civil penalties can range from to $250,000 (Commerce) to $500,000 per transaction (State), as well as include such consequences as denial of export privileges and debarment from U.S. government contracting.
  • Customs. The Department of Homeland Security’s Bureau of Customs and Border Protection oversees the regulations that set import duties and other fees, criteria for product origin marking and other admissibility requirements. Customs penalties can include seizure of merchandise or fines based on a percentage of the value of the goods or the lost duties and fees.
  • Conflict Minerals and Human Rights. As of May 2014, each company reporting to the Securities and Exchange Commission on an annual basis must report on whether the gold, tin, tantalum and tungsten contained in its products contributed to conflict in the Democratic Republic of the Congo or a neighboring country. Separately, to promote the UN Guiding Principles on Business and Human Rights, the State Department recently established the Burma Responsible Investing Reporting Requirements, requiring human rights due diligence and reporting by companies investing in Burma.

And this is just a broad and simplified list. So as your supply chain expands and innovates, you can see that you need to know what it’s doing when you are not looking.