What is in this article?:
- How the New SEC Ruling on Conflict Minerals will Impact the Supply Chain
- Three Impacts on Sourcing Strategy
- Taking Steps to Address the Ruling
Mickey North Rizza, vice
president of strategic services
Three Impacts on Sourcing Strategy
When a global supply chain consists of hundreds of tier-1 suppliers, the new SEC regulations that require companies to understand where these raw materials are sourced from -- down to the country and mine of origin -- seem nearly impossible to tackle if you don’t already have this level of reporting from suppliers.
However, the cost of inaction tremendously outweighs the steps and time companies need to invest to comply. Here are three impacts that go beyond supply chain operations, affecting the top and bottom lines:
- Worst case-scenario: production halts. The supplier information you’ll need for this reporting could paint a not-so-pretty picture. What if your production depends on a high-volume supplier which source from these controversial regions? You’ll need to scramble to find new sources of supply, at the last minute, to meet upcoming spikes in demand. Alternative sources are available in other regions of the globe, including a few in the US, but securing supply with so much competition from other businesses may be tough or even at a higher price.
- Customers turn to your competitors. The SEC ruling is the first major spotlight shone on conflict minerals, and it’s likely that consumers will catch on quickly, much like other CSR initiatives. Companies need to act quickly to avoid a backlash which could send buyers to competitors that don’t support the conflict minerals. Manufacturers and suppliers will feel the trickle-down effect.
- What most companies face: a drain of supply chain resources. At best, let’s call this a reallocation of resources. Visibility beyond prime suppliers to the tier-2 and tier-3 levels of the supply chain is the bare minimum of this ruling. Companies must undertake tactical outreach to suppliers to compile this information. In addition, businesses will need to reevaluate current technology systems to ensure that they can aggregate, analyze and report the information easily pull the reports.