Advances in technology impact a number of facets of our lives, perhaps most notably those that have enabled closer relationships among manufacturers, suppliers and logistics providers and allowed us to order a product online and have it delivered within a day or two, sometimes even later the same day. Vendors up and down the supply chain have incorporated new technologies to keep up with the speed needed to meet customer requirements, and forward and reverse logistics providers continue to receive more and more orders, two trends that come with a large volume of end-user data being regularly exchanged and a corresponding heightened risk of cyber-threats. These days, a common cyberattack, for instance, could result in a breach of consumer personally identifiable information, trade secrets and/or confidential production details or locations. One or more of these breaches could lead to negative publicity for the entire supply chain, and possibly even fines or some other financial repercussion.
There’s no question that quicker delivery times and the ease of purchasing products online have put pressure on each step of the supply chain. Performance metrics are always of utmost importance to manufacturers for each third party they hire to perform a service on their behalf, but monitoring performed by manufacturers can be burdensome on suppliers and logistics providers as they satisfy data requests, respond to inquiries and host site visits. This is especially true when suppliers or logistics providers are fulfilling requests for multiple customers year after year. To address these risks and interruptions, a supplier or logistics provider could complete a System and Organization Controls (SOC) examination to show its commitment to information security, internal controls and service performance. Fortunately, to help meet the vast change in supply chains, the AICPA recently released a new SOC report type to mitigate the associated risks.
SOC for Supply Chain contains a common set of criteria for disclosures and assessing control effectiveness, provides useful and relevant information to users, provides comparability, and will be updated to meet changes in the industry. SOC for Supply Chain would deliver an advantage when competing for work with user entities, manufacturers, or producers, and can demonstrate to users your company’s commitment to keeping data secure and meeting performance metrics.
As a supplier or logistics provider, you’re most likely working with a number of user entities who may be monitoring your performance. Being able to provide those user entities with a SOC report may reduce this burden. SOC for Supply Chain is not the only option either - a SOC 1 report would provide users with insight into your performance commitments and the impact on users’ financial statements, while a SOC 2 report would provide users with insight on the sophistication of your data security. Depending on your customers’ needs, a SOC 1, SOC 2 or SOC for Supply Chain report might be just what your organization needs to gain a competitive advantage, reduce time spent responding to customers, and allow you more opportunity to focus on operations.
Could your organization benefit from a SOC report? Visit our Service Organization Controls page or contact one of our Schneider Downs professionals to discuss your needs.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.