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Breaking Chains: New California Law Means Supply Chain Audits

September 29, 2011

If your business touches the great state of California, you'll want to know about this new law, effective January 2012.  The California Transparency in Supply Chains Act of 2010 will bring audits of supply chain practices to a new level.  Businesses need to know what's going on not just here, but over there.supply chain management software for audits

Starting January 1, 2012, if you haven’t scoured every corner of your supply network for possible dark spots, you must be able to show that:

  1. you are capable of a supply chain audit, and
  2. you have procedures, resources and tools in place to regularly execute such an audit, i.e., that you are capable

Supply chain visibility becomes law  In September 2009, the United States Department of Labor released a report that named 122 goods from 58 countries that are believed to be produced by forced labor or child labor in violation of international standards.  The State of California then passed a human trafficking law that will take effect January 1, within the law there is an amendment to the state Revenue and Tax Code.  This amendment includes disclosure requirements that will rock the supply chain and make transparency more necessary than ever.

This legality was a subtle part of the umbrella law, and it's only now that executives are realizing its ramifications.  There's a related flurry of business for supply chain management software, especially the more cost effective, quick to implement, platform and location agnostic Software as a Service (SaaS) modules. 

The new law is also expected to boost sales of headache pharmaceuticals for Supply Chain Managers around the world. 

From electronics to organic food   A supply chain in any industry, from electronics to aero and auto, and into food manufacturing and distribution needs to be able to audit its supply chain for sourcing and working conditions.  Consider some of the working conditions in the food industry, for instance, even though the electronics industry gets so much of the attention on this (e.g., Foxconn), not to mention mining, metals and oil & gas.

One good example is illustrated by how IPC, the renowned electronics industry association, points out the new law's affect on its member companies: 

There will be serious consequences for the entire electronics industry: customers will ask questions and supply chains will be audited regarding social responsibility practices, imposing extremely costly burdens. The immediate effect will be on organizations with annual gross global receipts in excess of $100 million, with a set of disclosure requirements that must be clearly publicized on company websites.

How to comply with California's new law  For more information, ask your quality assurance managers, risk management team and compliance officers to review the law itself, and consider contacting the advisor you trust for supply chain compliance.  Actio representatives are standing by if a consultation or demonstration of relevant SaaS software will help get your compliance efforts in line, but as with any outside resource in a pending deadline scenario such as this, contact sooner rather than later to assess the three key elements of an assurance program:

  1. whether a particular program or software tool can work in your unique business conditions
  2. how quickly it can be implemented
  3. whether the tool can work with your current software platforms/ERP/portal(s)

Good luck to all and to the Golden State.




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