
Evaluation of Supplier Compliance Parameters for the Services Industry

The services industry needs to focus strongly on financial compliance, ethical considerations, supply chain risk, and environmental impact. Whereas factors such as sustainability, IT security, labor, health, safety, and diversity are indirectly associated with sourcing.
Supplier Compliance Program |
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Parameters |
Impact |
Focus level |
Reasons |
Financial compliance |
Direct and high impact on sourcing |
Increasing effect |
Employers should focus on being financially compliant, as it is a fast-evolving and revenue-generating industry. |
Sustainability |
Indirect and medium impact on sourcing |
Increasing effect |
The increased significance of sustainability has forced many services companies to implement major environmental initiatives. For example, Yum! Brands has built more than 30 LEED-certified buildings, and McDonald’s is planning to eliminate foam packaging and is committed to source its packaging from recycled materials. |
IT security |
Indirect and medium impact on sourcing |
Moderate effect |
It is not widely adopted by companies across the world. It is in emerging stage, and they are beginning to adopt self-service kiosks, which impact human behavior. |
Labor |
Indirect and medium impact on sourcing |
Increasing effect |
As it is a service industry, restaurants need friendly employees/labor to engage with customers properly. |
Health |
Indirect and medium impact on sourcing |
Increasing effect |
A few companies adhere to the FDA menu-labeling rule of providing nutrition information for standard menu items; however, other companies, with fewer than 20 units or expanding, have not complied with the FDA rule, which leads to an impact on sales. |
Safety |
Indirect and medium impact on sourcing |
Increasing effect |
Companies need to adhere to each country’s food safety act and follow its standards. Employers are shifting from an end-production inspection and testing approach to a systems approach. |
Diversity |
Indirect and medium impact on sourcing |
Increasing effect |
Due to high frequency, and fragmented and unapproved suppliers, diversity in the services industry is generally not addressed and indirect spending is high. This lacks the visibility needed for the leadership team to make procurement decisions. |
Ethical concerns |
Direct and high impact on sourcing |
Increasing effect |
Companies need to have ethical practices to avoid huge penalties. |
Supply chain risk |
Direct and high impact on sourcing |
Increasing effect |
Due to fragmented suppliers for this industry, employers should focus on the risks involved in the process to avoid paying penalties to the government. |
Environmental impact |
Direct and high impact on sourcing |
Increasing effect |
These factors should be taken into consideration, as any initiative or commitment to long-term targets would take time to reduce the environmental impact. |
Sources: Spend Matters, Services magazine, ComplianceOnline
Challenges and Impacts of Supplier Compliance in the Services Industry
Adherence to regulatory factors in supplier compliance programs leads to a collaborative approach toward the supply chain network; any indication of high-risk suppliers calls for immediate action.
Challenges | Solution | Result |
These are the factors that have been high in challenges in supplier compliance programs:
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Case Examples:
- Companies like Dunkin’ Brands and McDonalds are implementing a single software supplier compliance program for the proper analysis of supply chain risk.
- Chipotle Mexican Grill created a traceability program to advance its commitment to safety and integrity.
- Yum! Brands and Subway have successfully implemented supplier compliance programs.
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