Supply Chain Risk Management: Compliance Takes Center Stage

Posted by Gary M. Barraco on Mon, Oct, 31 2011 @ 11:21 AM

Basic awareness of new product safety, social and environmental accountability regulations is not enough for brands and retailers; you must also initiate the daunting task of monitoring and documenting compliance throughout your supply chain.

Complying with these new regulations is an important part of protecting the image of the brand name, maintaining consumer satisfaction and steering clear of costly liability claims or fines against your company.   Almost every US retailer needs to make important decisions now before issues arise.

Social Accountability and Human Trafficking

The global concern of human trafficking is more prevalent than most of us imagine and new laws have far-reaching implications for retailers.  The US Department of State has estimated that human trafficking (which has broad definitions still to be standardized by government agencies) is a $32 billion global business, with over 12 million people worldwide held in servitude of one form or another, and up to 17,500 of these people are held in servitude in the United States.   Additionally, a Department of Labor report listed 122 goods from 58 countries that are believed to be tainted by forced or child labor.

International organizations such as Fair Labor Association (FLA), Worldwide Responsible Apparel Production (WRAP), Council on Economic Priorities Accreditation Agency (CEPAA), The Ethical Trading Initiative (ETI) and Business for Social Responsibility (BSR) have developed standards that are commonplace to offshore sourcing operations.  These codes of conduct have been embraced by retailers in the US for many years.  The basic principles include nine core areas that are the focus of frequent compliance audits conducted at factories, mills and tanneries that do business with US-based retailers.  They include: 

  • Child labor
  • Forced labor
  • Health and safety
  • Compensation
  • Working hours
  • Discrimination
  • Discipline
  • Free association and collective bargaining
  • Management systems

Keeping in mind the complex compliance conditions already in place, now the added layer of standards being enacted by individual states in the US means more effort needs to be exerted by brands and retailers. 

Consumer Product Safety

Enacted in 2008, the current Consumer Product Safety Information Act (CPSIA) is haunting brands and retailers as they try to decipher the regulatory requirements mandated by the US Governmental Agency that rules on this subject.  CPSIA expands the role of the Consumer Product Safety Commission (CPSC) in ensuring the safety of consumer products, especially those designed for children.

Manufacturers, importers and retailers of most consumer products will have to come comply with many provisions of CPSIA, including:

  • Rigorous lead restrictions for children's products
  • A ban on phthalates (chemicals used to soften plastic) in children's toys
  • Mandatory infant products registration
  • Conversion of a voluntary toy safety standard to a mandatory standard
  • Mandatory third-party testing and certification of toys and children's products beginning with the new lower limits on lead in paint content.
Implementing the Laws into Your Supply Chain
Ultimately, each company covered under the statute will have to make determinations of what policies to implement in anticipation of the mandated disclosures and regulatory filings, taking into account the actions necessary across the entire supplier network. 
Supplier and product compliance standards are not new to the retail environment.  In order to minimize the impact of these supplementary evaluation points, third-party supplier auditors can be contracted to conduct initial audits and monitor supplier conformance. 

 

Collaborative technology solutions are the key to preserving the trust of valued consumers and alleviate risk from litigation or costly fines.  Technology-based solutions, like ecVision Suite®, help companies increase supplier collaboration and visibility, supports greater supplier accountability, and is a conduit for broader, proactive supplier management activities. 

ecVision Suite® is a cloud-based platform that offers the functionality to fulfill the end-to-end, develop-to-shelf needs of both retailers and suppliers.  It is equally important to realize that integration to external and third-party systems can push & pull information into a central repository to increase its value and preserve existing investments. 

 

Using the Supplier Management Service within the ecVision Suite®, internal sourcing and compliance teams can work with factories, vendors and outside inspection teams to maintain strict adherence to the numerous performance standards, and subsequently build stronger relationships with each link in the supply chain through the collaboration tools on the platform.

Through integration to supplier inspection providers, the Supplier Management Service becomes the link for information to flow between these external organizations and compliance managers.   Armed with solid information about the products, materials and factories in their supplier network, retailers will find themselves better positioned to respond current and any other laws that may follow.

Topics: Supplier Management, Supply Chain Visibility, Supplier Compliance Questionnaires

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