This consideration was ranked first in terms of importance because if the supply chain fails to comply with the numerous regulations set by various countries and entities where it operates, as well as its contractual obligations, it will fail to exist altogether.
Supply chain networks that continuously fail compliance would be both extremely inefficient due to delays and investigations and carry heavy financial burdens of being sanctioned for violations, likely to eventually cease operations. Regulatory forces are extremely impactful in the supply chain industry, and failing compliance is not recommended.
Commodity availability is critical to the function of particular industries, such as healthcare, requiring closely monitored and well-maintained supply chain management systems to ensure access to resources, particularly in developing or isolated regions of the world. With the complexity of most modern industries and manufacturing processes, certain commodities are rare but vital to the product (lithium for batteries).
Given that many of such complex products are also consisting of multiple parts from various parts of the world, it is necessary for supply chains to ensure that commodities and resources are available at the right time and the right location, as without them, the whole production processes can be disrupted, further disturbing the supply chain and shipments down the line.
Water is included in the top half of the list because of the increasing rarity of fresh, clean water in many regions of the world and its increasing value. Access to fresh water is expected to become a valuable commodity in the next several decades due to environmental and geopolitical factors.
Furthermore, more industries are increasingly reliant on the water while not being within accessible distance of freshwater reservoirs (shale gas extraction and processing). Water will continue to grow in importance in global supply chains, forcing designs to consider that as a key commodity.
This consideration was placed in the second half of the list because while it is important in many ways by bringing value and resilience, it is mostly not absolutely critical. In many cases, supply chain firms do develop working relationships with specific suppliers to ensure supply-chain optimization and improve other aspects, such as reducing waste and environmental impacts.
These relationships bring the benefit of collaboration in capacity management, forecasting, and planning, which play a role in improving service levels and mitigating risks. However, these elements only offer a bonus, not a vital, function to supply chain operations.
While complying with regulations is critical, as discussed in the first consideration, the regulatory environments are often beyond the control of supply chains. The regulatory standards are developed by governments, entities, and involved parties. Supply chain network design should aim to comply with these standards and ensure that they are relatively similar across all points in the chain.
However, it is not a priority consideration in comparison to shipping key resources from a specific location. As a result, if regulatory standards are stricter in certain locations, the supply chain management can do its best to prepare and make the supply chain more resilient.
This consideration was placed last, as it usually has the least impact on individual supply chain network designs and concerns more geopolitical and economic factors of whole countries. While supply chain management should consider this when designing the supply chain, appropriate permissions and licensures are requested, and firms will be notified if there are certain discrepancies in international agreements or contracts. This may require reconsidering certain locations in the supply chain or finding workarounds to meet the requirements.