Daily Archives: December 12, 2006

Product Compliance

There’s more to sourcing than just acquiring products – a good sourcing plan aligns with your corporate strategy, which, hopefully, should be focused on green products and initiatives. That’s why Aberdeen’s benchmark report on Product Compliance: Protecting the Environment, Protecting Profits (courtesy of Managing Automation) caught my eye.

This report starts off by stating that most manufacturers have not developed systematic, repeatable product compliance processes that efficiently address today’s complex and challenging business environment with an every increasing corpus of complex legislation (including the recent EU RoHS directive and the 7th Amendment to the Cosmetics Directive) placing constraints on the design, distribution, and reclamation of each and every product produced.

Manufacturers today spend considerable time and effort ensuring that their products comply with a multitude of regulatory mandates. Yet many companies’ approaches to ensuring compliance have left them at a high risk of noncompliance, potentially resulting in an inability to sell in global markets, unmet customer mandates, blocked shipments, and associated revenue loss. The high risk level exists despite significant efforts to achieve compliance by most companies. In fact, meeting compliance challenges today has resulted in increased product development cost, decreased ability to innovate, and added staffing.

The most interesting finding in the report that caught my attention was that compliance performance is less dependent on level of effort than on implementing best practices and enabling those practices with the appropriate compliance infrastructure. In other words, brute force can not be used to tackle the problem, you need technology enabled best practices.

According to the report, top business initiatives being pursued include:

  • design for compliance
  • improving compliance documentation and evidence
  • bundling compliance into NPD (new product development) processes
  • proactively monitoring product designs for compliance
  • physically auditing products against compliance requirements

Furthermore, Aberdeen’s findings demonstrate that investments into best practices and enabling technology really pay off. Best in class companies have compliance rates of 90% or more, as compared with laggards who average 10% to 40% of products in compliance with applicable requirements. In addition, leading companies have 53% fewer stopped shipments than other companies and top performers have 35% fewer product recalls. Furthermore, there is often a strong disconnect between self-reported levels of compliance and assessed level of compliance. For example, Aberdeen’s Environmental Compliance in Electronics study (now AberdeenAccess members only) found that actual compliance levels are lower than self-reported and that companies are typically at a higher risk than they believe.

What are the major challenges that impact product compliance? According to the study, challenges include:

  • lack of consolidated information on regulatory requirements
  • lack of accurate product data
  • difficulty to determine applicability or exemption
  • resource or skill shortages
  • differing requirements by country
  • inefficiency in gathering material data from suppliers

These challenges can be addressed by the recommendations offered by the report:

  • adopt proactive compliance strategies
    and consider exceeding the strictest global standards in order to enable global sales
  • proactively monitor and assess compliance early in and throughout the product lifecycle
  • seek more detailed product composition from suppliers
  • audit content to address potential variability in your supply chain
  • standardize and centralize compliance processes and organizations
  • automate compliance processes with a compliance infrastructure

and by the following processes and technologies: