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On January 1, 2023, the so-called Act on Corporate Due Diligence Obligations in Supply Chains — known in common language as the Supply Chain Act — will come into force in Germany. Oliver, you have been dealing with this topic for quite some time. What is your impression? Are the companies that are affected by it well prepared for it?Initially, the law only affects large companies with more than 3,000 employees in Germany. My impression is that many of these companies are dealing with the issue but have not yet taken all the precautions to be able to fulfill the required due diligence.Just one year later, on January 1, 2024, even smaller companies with 1,000 or more employees will be affected. Even if this deadline still seems a long way off, there will be an urgent need for action from mid-2023 at the latest.What needs to be done in concrete terms?The law obliges companies to exercise due diligence with regard to the protection of human rights and the environment — and in particular with regard to their supply chains. This includes, for example, the protection of children, fair working conditions, environmental protection measures to ensure the health of workers — to name the most important aspects.To begin with, this means that companies must take a very close look at their supply chain and ensure maximum transparency: How, where and under what conditions do my suppliers produce? At which of my suppliers' production sites is there a risk of human rights being disregarded? And so on. Then they must work with critical suppliers to minimize their risk potential.Creating transparency in the supply chainThat sounds like a lot of work, which certainly creates major challenges for companies.That's true — but the good news is: there are established tools that can be used to digitize and automate these processes. If we take SupplyOn's solutions, they all essentially aim to create maximum transparency in the supply chain. This starts with master data, which can be easily maintained and updated via SupplyOn and is centrally available to the entire organization. It continues with action plans, which can be created and processed online, and extends to comprehensive risk management, which can be implemented via SupplyOn by incorporating external and internal data sources.Tools are one aspect — but how does a company integrate its suppliers into this process without having to invest an extremely large amount of time and effort?SupplyOn offers the advantage of an enormously large active supplier network, consisting of over 140,000 companies worldwide. Numerous data are already available here in the highest quality. Suppliers only need to update their data in one place. In the end, everyone involved benefits from this.The four-step approachWhat would be a pragmatic approach, in other words, what would you specifically recommend to a company — and how can SupplyOn support it?I recommend approaching the subject in digestible "bites" step by step, as follows:Step 1Create transparency in the existing supplier base: The SupplyOn Business Directory in combination with the Flexible Survey offers the possibility to make an inquiry among the suppliers. Corresponding questionnaires are already available in the system and can be used easily. The results flow automatically into the Business Directory. This sets the foundation on which to begin.Step 2Adding other aspects related to the Supply Chain Act to contracts: SupplyOn Contract Management offers contract templates that include these aspects and supports the update process for new and existing contracts.Step 3Creation of a catalog of measures to optimally support suppliers on their way to compliance regarding the Supply Chain Act: Using SupplyOn Action Management, remedial and preventive measures can be defined in coordination with the supplier and then processed in a structured and transparent manner for both parties. This ensures that agreed measures are actually anchored in the organization and that new processes are put into practice.Step 4Expand risk management and existing reporting processes to include Supply Chain Act aspects: SupplyOn offers the option of enriching an already established internal risk management system with external data in such a way that this creates an even more precise picture of the actual risk. In times of great uncertainty, this step is essential and should be the desired goal for all companies.And one final advice?Don't hesitate any longer, just start and work your way forward step by step.
As explained in my last blog article "Four steps to achieve 100% compliance in purchasing", purchasing organizations that take the topic of compliance seriously should first create a solid basis with the introduction of standardized processes and tools in order to achieve company-wide transparency and consistency in their purchasing activities. This allows mandatory topics such as avoiding bribery or maverick buying to be brought under control.Today’s world is more complexBut compliance today encompasses much more than the purely mandatory topics and has become significantly more extensive, complex and dynamic. Purchasing is ideally positioned for these new requirements thanks to its central role in the company.Examples of the new requirements are:More comprehensive risk management in the supply chainHigher requirements for IT security and data protectionNew legal requirements, which can vary greatly from country to country For example, the Supply Chain Due Diligence Act or Conflict Minerals Reporting based on the Dodd-Frank ActSanctionsFor example, in the case of violations of the human rights of UyghursConstantly increasing requirements from customers or from our own product marketingFor example, the reduction of the CO2 footprintThe good news is: to address these new challenges, you can build on solutions that are already in place. The core processes of purchasing, which are already digitized today, can be relatively easily supplemented with further needs from compliance and risk management.In this context, it is not only important that all relevant departments internally, i.e., quality assurance, logistics, product development, data and security management, compliance management, etc., are involved in the processes, but also that the results of these processes are available for strategic purchasing decisions. For this to succeed, purchasing must become active at an early stage and needs access to these other areas.Key player: the Sourcing Decision SheetAs in my last blog article, I would like to explain the practical implementation using our customer Continental Automotive as an example. Just as for the Rfx process, uniform processes and software tools were defined for the various compliance topics and made available via the SupplyOn solutions. The aim here is also to involve suppliers at an early stage and to provide them with central access via SupplyOn to maintain the necessary information.At Continental Automotive, the so-called Sourcing Decision Sheet, which forms the basis for decision-making by the Purchasing Council at Continental and which used to be based primarily on price and conditions, has been and will continue to be successively supplemented with information from the various compliance aspects. As a result, these are also automatically taken into account in the supplier selection. The decisions made by the strategic purchasing committee are in turn recorded and documented centrally in the tool.Here are some examples of data that automatically flows into Continental Automotive's Sourcing Decision Sheet from non-purchasing areas:Risk Management: Suppliers of production material must include in their bids all locations that will be relevant for the production of the requested parts. Based on their geo-location, all specified locations are automatically classified and assigned to the risk categories specified by Continental.Supplier Assessment: Performance data is already available for suppliers with whom Continental Automotive has been working for some time — both at site and commodity level.Feasibility Study: For new parts to be developed, feasibility analyses with regard to technology, quality and logistics are carried out in parallel with the sourcing process with the suppliers in question. This process is supported by the SupplyOn Technical Review service.Certificates: All suppliers are required to enter their status for standard industry certificates in the SupplyOn Business Directory. Depending on the certificate type, availability is sometimes even a mandatory prerequisite for being awarded a contract.Compliance: Adherence to guidelines and regulations can be flexibly queried from the supplier or alternatively integrated from external data sources or customer systems. All these different aspects flow into the Sourcing Decision Sheet and generate a holistic picture based on formulas and weightings that can be defined freely. Purchasing thus has a flexible and scalable tool at its disposal for effortlessly mastering all aspects relevant to procurement. This means that purchasing is well equipped not only for current challenges, but also for those of the future.Action recommendations at a glanceIn summary, here are the steps that should be followed in order to cover all aspects and achieve 100% compliance in purchasing:The dutyFirst of all, it is necessary to introduce uniform and company-wide binding core processes that are anchored in the organization via suitable tools. In this context, increasing master data quality is a very important aspect. High data quality is a prerequisite for any kind of digitization and thus a homework assignment for all organizations involved. The good news is that digitization not only requires high master data quality, but also supports and enables it.The extra mile for even higher performanceThe extra mile consists of supplementing the core aspects in the award process — i.e., price and conditions — with all aspects of a 360-degree compliance management process and integrating these into the strategic decision-making process.
