Legal issues
Supply chain and logistics considerations are guided by various legal issues. Introduction of a new law implies that companies will have to review their supply chain and logistics operations. California Transparency in Supply Chains Act is a law which has positive and negative impacts on supply chain participants. The law adds a new twist to accountability of large scale retailers and manufacturers operating under California jurisdiction.
The law makes it mandatory for large scale retailers and California manufacturers to make transparent the efforts they make in eradication of slavery and trafficking of humans within their supply chains (Just-style,2011). The law primarily targets retailers and manufacturers in footwear and apparel industry and comes with mixed fortunes for the affected stakeholders.
Arising legal obligations
Firstly, there are a number of additional obligations that affected companies have to address. These include verification of third-party supply chains, running unplanned audit of suppliers, as well as staff training on human traffic and forced labor issues. Additionally, the company has to certify compliance to its suppliers and improve in-house standards of accountability. The law imposes a legal regulation on what is considered to be an ethical obligation or corporate social responsibility. However, in this case, the retailers and manufacturers are compelled to implement the aforementioned. This obligation translates into a consumer right to question, authenticate and be certain that products they buy are not beneficiaries of forced labor or slavery (Just-style,2011).
The law comes with further legal obligations as it directly infringes on existing as well as future contracts design. Its effects extend beyond supply chain within California State. This not only strains company supply relationships but increases the costs incurred by the company in order to meet legal obligations it imposes. Additionally, it should be emphasized that implementation of the latter will call for a holistic review of corporation’s supply and logistics policies.
Risk management
It is also worth mentioning that the law promotes enhanced risk management. Given the corporations have an obligation to ensure the entire supply chain is clean, they gain a better understanding of their clients and as such minimize their risks (Trunick, 2011). The retailers and manufacturers have to involve suppliers from all tiers, either directly or indirectly, and hence minimize their risk exposure.
The retailers and manufacturers will have to invest in investigation of compliance with the legal threshold by all involved in the supply chain. This would mean a shift from the policy where first tier suppliers are responsible for second and third tier suppliers. The manufacturers and large scale retailers will have to engage all levels of suppliers directly or compel the first level suppliers to certify that all products supplied comply with the non-slavery or lack of forced labor requirement. Additionally, training means additional expense and this would be required to extend withing the supply chain. This cost will have to be shouldered by the consumer.
Conclusion
The law introduces increased accountability within the supply chain. It makes the retailers and manufacturers directly responsible for any arising cases where supplied products are made from slavery or forced labor. The law, however, has far reaching effects on the supply chain. Its effects extend beyond the supply chain in California. In order to comply, the retailers and manufacturers have to spend more on operations, in addition to involving the entire supply chain. Redrafting of contracts as well as restricting of contracts already in existence is inevitable.
References
Just-style. (2011). Companies prepare for California supply chain law. Web.
Trunick, P. A. (2011). Mitigating Supply Chain Risk. Inbound Logistics. Web.