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Aberdeen Asks: What’s Your Compliance Competence?

September 27th, 2006 · by Tim Minahan · 2 Comments · best practices, contract management, financial value chain, supply management

I sat down with the new supply management research squad at Aberdeen Group yesterday to discuss their latest research effort: compliance. The team, anchored by ex-ERP and e-procurement solution provider veterans, Vance Checketts and Andrew Bartolini, has set its sights on how new regulatory requirements — especially the Sarbanes Oxley Act (SOX) — have impacted supply management operations, technology investment decisions, and the function’s alignment with the financial organization.

Vance says the study will examine three aspects of compliance:

  1. The awareness of external regulatory requirements by an enterprise and its suppliers.
  2. Supplier compliance with contractual pricing, terms, conditions, and deliverables.
  3. Compliance with internal documented policies and procedures

While Aberdeen is still surveying finance supply management executives on the subject, early returns suggest a clear link between new regulations and changes in supply strategy. Vance says respondents rank compliance pressures among the leading drivers for supply management technology investment. (A finding backed by my own pulse on market demands for contract management and spending analysis solutions.)

Vance and Andrew revealed that motivation for the study came from previous Aberdeen research into enterprise compliance initiatives in which 70% of supply management groups reported that SOX had increased the need to improve standard controls and procedures. (A point validated by my recent discussions with the CPO at a large services company which, after failing a compliance audit, have made improving contract management procedures and systems a top priority.)

In a recent preview “Research Brief” on the subject, Vance and Andrew wisely point out: “While initial concerns that SOX initiatives would run roughshod over the enterprise were overblown, progressive procurement organizations were able to channel the intense scrutiny on compliance to standardize internal processes, develop stronger contract management capabilities, and establish more robust policies to prevent non-compliance.”

Aberdeen’s new dynamic duo has asked us recruit additional supply and finance professionals to participate in this important study: The CFO’s View of Supply Management Compliance.  You can participate by completing Aberdeen’s survey here. Check back with Aberdeen in October for the results.

I hope this is just the tip of the iceberg for Aberdeen’s supply management compliance research. Other areas of compliance Supply Excellence readers would like to hear more on include how supply organizations are responding to new environmental regulations, such as ROHS and WEEE, and how they are meeting socially responsible and sustainable supply chain goals. I’m sure Vance and Andrew and the rest of the Aberdeen won’t leave a compliance stone unturned.

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2 responses so far ↓

  • 1 Richard Cotter // Oct 5, 2006 at 4:19 am

    Another area of compliance which is increasing in importance is customs and supply chain logistics. Initiatives like C-TPAT, WCO SAFE and EU AEO regulations are placing and increasing focus on security and safety, and compliance with customs regualtions is an important foundation of the initiatives. During 2007/08 some form of customs compliance authorisation will become essential for any company engaged in international trade. If they do not have it they risk significant disruption to their supply chain and will also incur higher costs through delays and increased inventory.

  • 2 Tim Minahan // Oct 5, 2006 at 4:00 pm

    Richard:

    I absolutely agree! Compliance is a much broader issue for supply managers than just financial compliance — although SOX is getting all the attention.

    In addition to the environmental regulations I discussed above, C-TPAT, OFAC, and the other compliance areas you list are only increasing in importance as supply chains become more global. You are absolutely right to point out that supply managers must have standard and auditable procedures in place for cross-border logistics, security, and documentation.

    Sourcing and supply managers will need to balance these requirements and any potential performance impact against the surface-level cost benefits of sourcing in emerging markets, like China, Singapore, Malaysia, and Eastern Europe. In addition, constantly changing tariffs and VATs will increase the need for supply managers to quickly assess total landed costs and adopt innovative sourcing and inventory postponement strategies to optimize true total supply costs — including taxes.

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