4 Ways ERP Systems Facilitate Supply Chain Compliance
Compliance is about following the rules. In a modern business operating in some form around the world there are many rules to follow and ERP can help in many situations. We usually think of compliance in the domain of quality but there are supply chain compliance issues too.
ERP Compliance Support 1: Compliance with Taxes
Both value-added taxes and sales taxes can be tracked in detail using ERP systems to satisfy any taxing authority. These are geography-based taxes. The rate inside a city limit might differ from the rate just across the city limit.
Sales and use taxes are common in the USA. If an item is purchased for resale or to be used in manufacturing as inventory it generally is not taxed. This can be a simple on/off switch in a purchase order. Another item purchased as a supply or consumable will be taxed. The ultimate rate is determined by where the item is used. There are a lot of details to get right but your ERP can track it all and help you satisfy any auditor.
Similarly a European value added tax is based on the difference between the incoming cost and outgoing value of an item at a particular location. This can be tricky if your purchase order receiving is at a location just inside a city but the material is used in conversion at another facility just outside a city. No problem though – ERP systems can handle accountancy based complexity.
ERP Compliance Support 2: Environmental Compliance Issues
Food processors might need to track the exact field where the crop was grown. No matter where the processing is done, that field might be anywhere in the world. Food processors will also need to track the temperatures of the refrigerated containers that brought the supply to the processing plant and keep a record of prior processing such as butchering done by a supplier. All of which can be handled by the right ERP system.
ERP Compliance Support 3: Tariffs and duties when supply chains include inbound shipments across national borders
Other regulatory compliance your ERP will track include the use of conflict minerals and the California transparency in Supply Chain Act. Your ERP will record when a liability is created and when it is paid to the regulatory authority. Non-financial reporting in the supply chain can be tracked and detailed using the analytical and reporting tools in ERP.
ERP Compliance Support 4: Procurement Compliance
A business has obligations to deliver on customer orders. A tsunami on the other side of the world might interfere with material deliveries. Procurement compliance means there are alternate suppliers and back-up plans to meet customer obligations even when the supply chain might be interrupted. Your *ERP system can store this information minimising disruption to the supply chain.
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