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Enhancing supply chain visibility to achieve compliance

Facing an increasing sea of regulations around environmental and trade practices, manufacturers are enhancing supply chain visibility as a way to achieve compliance.

Providing a more accurate, real-time picture of demand signals or supplier inventory levels is the focus of most manufacturers' supply chain visibility projects. But facing an increasingly complex regulatory climate, manufacturers are beginning to want enhanced visibility to help meet compliance directives related to trade practices, environmental mandates and upcoming serialization and track-and-trace laws.

"[Compliance] is an up-and-coming factor, and manufacturers are expecting a lot more regulations for environmental compliance, around packaging for trade compliance and things like ePedigree, for understanding where your product is coming from," said Noha Tohamy, vice president of research at AMR Research, a Gartner company. "We see a lot of manufacturers working with the government and their customers to come up with what to invest in without stifling their ability to be profitable and efficient within their supply chains."

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 One of the more prominent areas where enhanced supply chain visibility comes into play is environmental compliance. Regulations like REACH (Registration, Evaluation, Authorization and Restriction of Chemical Substances), which makes manufacturers responsible for tracking and managing the hazardous chemical substances that are part of their products; RoHS (Restriction of Hazardous Substances); and WEEE (Waste from Electrical and Electronic Equipment) up the ante for manufacturers. These directives require manufacturers to keep tabs not only on the attributes of the supplier components and materials that go into their products but also on how those parts and components are disposed of and potentially recycled at end of life.

The ramifications for manufacturers that aren't on top of these mandates can be quite significant -- costly redesigns, scrapped parts, blocked shipments, potential customer dissatisfaction and, possibly, steep fines. Most manufacturers are still using spreadsheets, homegrown databases, even manual processes to retrieve and manage this data with their supply chain. Increasingly, however, a variety of enterprise systems -- from supply chain offerings to product lifecycle management (PLM) suites -- are adding functionality to help manufacturers automate these processes and more effectively track and improve the environmental performance of their products.

Forthcoming environmental regulations around carbon emissions will be the real game changer for manufacturers, stepping up the need for visibility solutions to aid in meeting compliance. "If you look at what Walmart is mandating in terms of having to reduce the carbon footprint of the products that are offered in Walmart stores, visibility is a huge part of being able to track that information because there are so many parties involved in creating one product's carbon footprint," said Amy Drevna, senior vice president of marketing for One Network. According to a study by the Business Performance Management Forum and E2open, a provider of on-demand supply chain management services, 42% of companies surveyed have yet to consider carbon footprint or greenhouse gas emissions across their extended supply chain. While 76% of respondents said their customers have not requested such information, two-thirds expect them to demand such data in the coming years.

Aside from environmental compliance, new laws related to global trade are another area where manufacturers can benefit from better visibility in their supply chains. Global trade management solutions like those from Management Dynamics, Oracle and others automate the processes that allow manufacturers to efficiently trade and collaborate across borders and ensure they pay the correct amount of duty while protecting against fines and penalties, as well as loss of trading privileges.

Directives around serialization and track-and-trace laws emerging in such industries as pharmaceuticals and retail are yet another area of compliance that can directly benefit from improved supply chain visibility. Companies such as Acsis and IBM, among others, are offering solutions, many based on barcode and RFID technology, to help track, monitor and measure the chain of custody of a product as it moves through its lifecycle.

Despite the fact that all of these compliance efforts create visibility challenges for manufacturers, compliance is rarely a springboard for building a case for a specific supply chain visibility project. John DiPalo, chief technologist for Acsis, said: "The message is you should focus on the traceability and visibility of products and get compliance as a byproduct, as opposed to compliance being the focus."

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