Reducing compliance risk yields competitive advantages for manufacturers.
In an increasingly interconnected world that's still reeling from a near-meltdown, the appetite for risk-taking and strategic blunders is understandably low. There are ways to manage your exposure to compliance risk, and reap the benefits of a networked world with competitive advantages like secured and efficient lower-cost foreign sourcing and new export markets.
Those who fail to effectively manage compliance risk face significant regulatory penalties including fines, shipping delays and seizures, denial or restriction of export or import privileges, even jail terms. As well as catastrophic reputational damage that can cause customers to flee and market value to plummet.
Compliance increases financial value
For many manufacturers, M&As have never looked as attractive as a means of rationalizing operations to gain efficiency and deliver more value to customers and shareholders. The prudent include homeland security and corporate governance in M&A due diligence. This is particularly important in view of how years of economic contraction and increased regulation may have weakened compliance processes.
Aside from compliance-as-an-asset, the benefits of simplified and centralized compliance controls include enhanced cost-reductions, flexibility, greater efficiency, and reduced risk exposure—all essential qualities for higher performance.
The benefits of integrated compliance across the enterprise
For most large manufacturers, improving manufacturing operation performance is often top of mind. Fresh thinking in light of the changing economic and governance climate can play a vital role in ensuring sustainable success.
For example, it is no longer enough to consider manufacturing operations in isolation. Strategies that engage with the wider business—sales and marketing, back office functions, procurement, logistics, and HR—across domestic and international locations are necessary to achieve competitive advantages and ensure compliance in changing marketplaces characterized by economic volatility, heightened regulatory scrutiny, and competition from emerging entrants.
By taking a more integrated view and ensuring the integrity of their reputations through enterprise-wide compliance, manufacturers can increase their chances of securing sustainable cost reductions, revenue growth and customer loyalty.
Compliance aptitude required of contract manufacturers
Contract manufacturers have become the de facto production division for many U.S.-based companies seeking to outsource non-core competencies, reduce supply chain costs and capital expenditures, and build flexibility into production operations and sales strategies.
To the degree their customers have export compliance requirements, so too do contract manufacturers themselves. For example, those working for customers with goods under ITAR jurisdiction must themselves register with the Department of State (Directorate of Defense Trade Controls (DDTC)—even if the contract manufacturer does not physically export the controlled items. more +
The United States Munitions List (USML) includes components, parts, accessories, attachments, and associated equipment for use with the equipment in each of the USML categories. Consequently, subassemblies and other contract manufacturer builds are also controlled.
Similarly, because ITAR controls technical data required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles, including information in the form of blueprints, drawings, photographs, plans, instructions and documentation, contract manufacturers require technology control plans or require licenses for dissemination to staff or sub-contractor staff who are non-U.S. persons.
Complying with DDTC requirements includes various change notifications, maintenance of records, and license applications as well as ensuring goods and technologies—information, know-how—are kept from ineligible people, organizations, and governments.
For goods under EAR jurisdiction, there are similar end-use, end-user and license requirements.
Supply chain innovations
With intense global pricing pressure, many manufacturers have implemented low cost country sourcing strategies and developed new export markets to remain competitive. With changing regulations, including preferential trade agreements, this important enabler for manufacturing companies looking to boost shareholder value through global supply chain management best practices necessitates:
- A robust, flexible sourcing strategy to continually find the most competitive supply base
- Automating end-to-end global trade compliance management process to manage key trading partner relationships
- Managing in-transit inventory to postpone fulfillment decisions and better meet local demand