By James Humphrey, VP EMEA at Salsify
In the last six months, the impact of changing retail regulations has been felt keenly across a variety of industries. We have seen changes and enforcements under Natasha’s Law for all prepacked food, the sourcing of timber under new UK Timber Regulations, and the high fat, sugar and salt (HFSS) legislation that is currently rocking the grocery industries – a governmental strategy to tackle obesity and foster healthier nutrition in the UK. HFSS legislates to restrict promotion of HFSS products in store entrances, aisle ends and checkouts for stores over 185.8 square metres (2,000 square feet). For retailers, this impact is particularly acute as they face the brunt of several far-reaching consequences.
Another example is the European Union Timber Regulation (EUTR) covering the responsible sourcing of timber products – prohibiting illegally harvested timber and products produced of such timber – coming into the EU. Following Brexit, the UK Timber Regulation (UKTR) is replacing and replicating the EUTR. In effect from January 2021, its impact has been farther reaching than many retailers had prepared for. From bed bases and baby cribs to the wooden handles on cooking pots, more products are affected than retailers considered.
To comply, timber traders are required to keep records on who they bought from and sold to, while operators must also exercise due diligence to ensure that timber has not been illegally harvested. Failing to comply can mean an unlimited fine and up to two years in prison. From a retailer’s perspective, previously, compliance would have been the suppliers’ responsibility. Now, it falls to them to ensure both they and their suppliers are compliant.
Immediate concerns retailers are facing
Retailers and suppliers are concerned, and they know they need to act to minimise risks to avoid negative consequences for their businesses. In view of the HFSS regulation, retailers’ concerns cover
- keeping product catalogues updated
- lack of transparency on named brand formulations
- responding to higher expectations of corporate responsibility
- challenges around private labels versus national brands
- managing limited capacity within the team
- product data accuracy
Also for other regulations impacting the retail industry these days, the key is product data accuracy and transparency.
How are retailers reacting?
Taking a wider perspective, supply chain due diligence has clearly become a sticking point for retailers over the last twelve months, with some taking dramatic steps.
According to research by Barclays, in the UK, one in five retailers cancelled contracts last year with suppliers who fell foul of ethical and sustainable standards. And a further 79% believe that long-term improvements to the sustainable, ethical, and legal nature of their supply chain are more important than overcoming short-term supply chain disruption.
The financial implications of this are significant. Of those surveyed, on average six contracts were cancelled per retailer at a value of £306,000 per contract. As a result, Barclays places the overall value of cancelled contracts at £7.1bn over the last twelve months.
Given the clear financial implications, how can retailers better assess their supply chains to ensure due diligence?
Ensuring supplier compliance in a complex retail (regulatory) landscape
There are simple steps that retailers can take to avoid financial disruption to their supply chain and conflict with the law. Adopting a more collaborative supplier relationship represents an effective way of facing this challenge, which consists of three key pillars that need to be taken under consideration:
1. Risk and Reporting
One of the first steps retailers can take is via better collaboration with their suppliers through an open collaboration model. Establishing a flexible and automated collaboration model will go a long way in making retailers ready for not only these and future regulatory changes.
Through this model, it is easier to identify areas of risk or non-compliance. Retailers can also better formalise reporting obligations and documentation throughout the supply chain, submitting reports annually that prove compliance.
2. Manage and counteract
Getting ahead of the issue is equally as important. Such models can include developing and implementing sourcing and purchasing strategies and defining quality standards, as well as control mechanisms for the supplier relationship.
Additionally, managing complaints is essential too. If issues of non-compliance in the supply chain are revealed, this is where the introduction of an escalation level for when infringements are unveiled along the supply chain will be essential.
Finally, should retailers become aware of non-compliant practices, they must have productive countermeasures with a focus on ensuring illegal practices impact neither retailer nor supplier.
3. Embracing master data
This type of collaboration is only possible by embracing the potential of master data management. By implementing master data, retailers can better understand exactly where and how a product was manufactured, and what individual components are. Embracing such data makes compliance with laws such as HFSS and UK Timber Regulations, to name a few, much easier to navigate.
From a retailer’s perspective, this makes monitoring the supply chain far easier, preventing the need for dramatic cancelled supplier relationships. Instead, using the information afforded by master data, retailers will be able to respond proactively to issues as they happen.
To make the most of the opportunities afforded by master data, a commerce experience management platform can make this possible. Such a platform enables retailers to go far beyond previously established standards of supplier-retailer relationships. With this amount of evidence, the platform data can be used for all aspects of supplier management.
There is no denying that the organisational burden of this raft of changes is immense and will affect businesses in varying ways, but it is achievable with a strategy that puts collaboration between retailers and suppliers at its heart.
If there was ever a more pertinent time to embrace this change for UK retailers, it’s now. The next six months will see HFSS, UK Timber and chemical regulations come into play in a way that is set to significantly impact attention on a retailer’s supply chain. In order to manage the risk of cancelled supplier relationships and mitigate against the need for lengthy due diligence processes, open collaboration and master data is the answer.
Whereas in the past master data management was more of a chore for IT, which had to prepare data for purchasing, marketing, controlling and perhaps distribution, it is now becoming an integral part of the implementation of regulations.
Technologies allowing suppliers to easily manage and share their product data (being the core information with regards to the above mentioned regulations) to multiple retailers in one action, will facilitate the retailer-supplier-collaboration, foster transparency and ultimately compliance with diverse regulations.
To discover more about this approach, please visit the website https://www.salsify.com/platform/supplierxm