Expanding Your Influence as a Product Steward - Part 3: Reducing Risk Throughout the Supply Chain
As with other areas of business, product stewards can help reduce risk throughout the supply chain. Supply chain snags can have a significant impact on operations, business continuity, the brand, and profitability. Through their awareness of global chemical/product regulations, product stewards have the unique ability to communicate regulatory requirements with stakeholders to help them understand their obligations, regardless of where they are in the value chain.
There are many aspects of the supply chain, but today we’re focusing on raw materials and manufacturing.
Why product stewardship guidance on raw material regulations is important
Not adhering to rules and regulations on raw materials can stop production, impede product delivery and cause financial loss. Too often, companies underestimate the work and expertise it takes to stay compliant.
Let’s look at an example. To save costs, Company X switched suppliers of an ingredient, changing from one U.S. supplier to another. Both suppliers’ ingredients met Company X’s purity and quality expectations, so purchasing assumed that switching to the less expensive supplier was a no-brainer.
The fact that Company X sells in Europe was not considered in the supplier change. While their original supplier had completed the required registrations necessary to comply with the European Union REACH Regulation, the less expensive supplier did not. This oversight caused products to be held at customs in the EU, delaying shipment of the product to customers and requiring additional efforts by internal regulatory staff. The savings originally realized quickly disappeared due to the delay in product delivery and actions required to address the compliance issues.
Had a product steward been involved in the decision or been made aware of the proposed supplier change, Company X may have avoided the additional regulatory challenges and met customer needs.
How? A product steward would have been aware of the compliance requirements for their final markets and worked to mitigate effects on the business. Even if the supplier change was necessary, compliance obligations handled proactively could have reduced negative impact.
While thinking globally, don’t forget your own backyard
Non-compliant products can result in devastating business losses due to increased regulatory burdens and loss of customer confidence; but it doesn’t have to be that way. Companies that are mindful of not only chemical/product regulations where they manufacture, but also where their supplies originate and their products are sold, reduce the risk of fines and business continuity disruptions.
Product stewards can help organizations make better informed decisions when it comes to acquiring new businesses across jurisdictions.
Let’s look at another example. A U.S. company was looking to acquire a company in Germany to expand its business. Although the German company’s regulatory compliance practices were robust, a pre-acquisition product audit identified a substance key to its products that was not on the U.S. Toxic Substances Control Act Inventory. This comprehensive evaluation revealed that U.S. regulatory compliance had not been previously addressed and allowed the U.S. company to leverage that finding and negotiate the associated cost with the acquisition.
Product stewards are key to identifying new regulations and updates to maintain compliance
The chemical/product regulatory landscape is significantly different today than two to three years ago, maybe even yesterday. New regulations and changes to existing regulations happen continually. The rapid globalization of trade and the daily changes in that landscape require companies to be ever diligent. Even if your company’s products complied with REACH three years ago, they may not comply now. Establishing an ongoing process for tracking and evaluating these changes is critical to understanding and managing compliance throughout the supply chain and distribution network.
It’s also important to monitor substances that may soon come under additional scrutiny and regulatory action so that products and processes can be modified proactively. Consider phthalates. Over the last few years some have been restricted in various EU regulations (including REACH). And, that activity does not stop with the EU. It’s rapidly expanding across the globe. In fact, the Consumer Product Safety Commission recently expanded the number of phthalates included in its ban, as well as the number of product types included. Phthalates are but a single group that is being examined by non-governmental organizations (NGOs) for their effects on human health or the environment. NGOs are working harder than ever to influence regulations by generating data and employing identified experts. It’s vital to stay on top of whispers, trends and available scientific data to address activities that could result in new rules or regulations.
How third-party product stewards are helping companies stay compliant
Maintaining awareness and confirming supplier compliance with appropriate regulations is complicated and time-consuming. Many companies have realized that help from a third party is not just beneficial — it’s essential. Objective third-party experts can take a comprehensive look at best practices across industries to help manage compliance. Supplier certification statements and contractual documentation must be critically evaluated to keep your operations running smoothly.
This is especially important when confidential business information (CBI) and intellectual property are involved. A third party can help evaluate the critical information while transmitting only the necessary compliance information up and down the supply chain. Alternatively, it may also be possible to establish an internal regulatory group that can act as an independent agent to protect CBI from reaching other departments within the group’s own firm.
Product stewards and the production value chain: Consider all things, cradle-to-cradle
More and more products are becoming subject to End of Life (EoL) regulations that place restrictions on product composition and establish responsibilities for managing disposal and recycling. These types of regulations are often associated with complex articles like electronics or automobiles, but simpler articles such as batteries and even packaging are also affected. Like other regulatory drivers, obligations related to EoL regulations can get complicated and expensive to manage, varying widely by geography.
Understanding and navigating the wide range of compliance responsibilities, including product composition control, disassembly mechanisms, take-back options, and disposal and recycling requirements are critical to minimizing the impact to your organization. The additional costs and regulatory activities associated with these EoL requirements can catch a manufacturer off guard and significantly reduce profits.
Wrapping up: Expanding your influence as a product steward is integral for the success of the entire value chain
Clearly, the role of the product steward has never been more important. Today's regulatory landscape and global business practices make product stewardship paramount in avoiding non-compliance, maintaining business continuity and protecting your brand. Although I'm wrapping up this series about expanding your influence as a product steward, there's still a lot more to say. I’m interested in how other product stewards help their companies and clients manage these complex issues and stay compliant. Share your story in the comments and spark more conversation!
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