Home Featured The Cost of Compliance – a guest blog from ecVision

The Cost of Compliance – a guest blog from ecVision

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In this exclusive guest blog, Gary Barraco, Director of Product Marketing for ecVision, looks at how material compliance can affect brand perception, and at the potentially catastrophic consequences of getting it wrong.

Consumers pay more attention than ever to the quality of materials used to fashion the clothes, purses, shoes and accessories they purchase to ensure government-directed regulations are met.

In order to produce reliable, high-quality products that loyal consumers expect, it is imperative for manufacturers, retailers, importers and distributors to proactively evaluate textiles, trim and components in these products to ensure they are producing goods utilizing materials that meet any of the above regulations.

Cost and risk are the major concerns for product safety compliance.  There are typically nine cost components associated with a product compliance failure. These costs fall into three main categories: lost revenue, short-term crisis mode costs, and long-term capability-building costs.

[quote]Cloud-based technology platforms provide real-time visibility, workflow and management by exception tools […] to holistically manage product safety and factory compliance.[/quote]

$ Cost #1: Lost revenue from products taken off the market

$ Cost #2: Lost revenue from interruption of supply chain production and/or missed opportunity to launch a product as expected.

$ Cost #3: Fines and fees associated with product safety failure; regulatory fines, customer penalties and other fees, including those arising from lawsuits and public relations services.

$ Cost #4: Design, requalification and testing required to fix a noncompliant product, including revamping of design, retooling of production facility, and requalification and reliability testing of all new materials and finished goods.

$ Cost #5: Replacing noncompliant units that are already in the inventory; footwear and apparel brands typically have to scrap these units since they can’t be sold “as is” or re-worked. All shipping costs must be included here.

$ Cost #6: Address noncompliant units in production; scrap noncompliant components and/or finished goods, transition existing suppliers, or identify and ramp up new ones.

[quote]The cost of failure is exponentially higher than any solution […] but still organizations are reluctant to invest in technology to avert potential disaster.[/quote]

$ Cost #7: Data collection, documentation and reporting required by regulations to track and ensure product compliance internally, and ultimately provide evidence that the product is compliant. This verification involves collecting the relevant material content data from all suppliers and performing the required analysis and documentation at the raw material and product level. The cost of this effort will increase if internal and external supply chain members need to be educated about what data needs to be collected and how it is to be reported.

$ Cost #8: Short-term process and organization changes that are required to take corrective action; for example, teams and processes may need to be formed to fill gaps in the current supplier declaration, collection, validation and documentation process. These costs may be increased because the company will generally be operating in crisis mode, which in-turn leads to expediting costs and higher labor costs.  The organization might also experience errors as employees and the supply chain learn the new processes.

$ Cost #9: Long-term process and organization after the immediate crisis; this might include enterprise-wide process changes that solidify a long-term shift to present future failures.

The cost of failure is exponentially higher than any solution that could assist with product management, but still organizations are reluctant to invest in technology to avert potential disaster.

Retailers and manufacturers need to focus on legitimately collaborating with the supplier network to manage risk on all levels in order to avoid costly fines, delays in production and shipping, or lawsuits from customers.  Whether using external testing company platforms, home grown or legacy systems, or Excel spreadsheets, the data is scattered and not integrated into the primary supply chain management solution.

Cloud-based technology platforms provide real-time visibility, workflow and management by exception tools that are a simplified way to holistically manage product safety and factory compliance.  By adopting this type of solution, brands and manufacturers can:

  • Consolidate information about product testing and factory compliance from multiple systems into a single source
  • Collaborate with external parties (suppliers and 3rd party testing companies) for test execution and monitoring
  • Streamline communications throughout all processes
  • Generate reports to monitor the processes, demonstrate due diligence and traceability
  • Providing real-time data management and decision support to ensure that senior management receive accurate information on causes, financial impact, and mitigating actions to control risk

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Recognizing that the regulatory environment continues to increase in complexity, leading brands and retailers have moved away from manual-based methods for compliance, deploying technology to centralize and manage the full range of compliance activities.

Ben Hanson Ben Hanson is one of WhichPLM’s top contributors. Ben has worked for magazines, newspapers, local government agencies, multi-million pound conservation projects, museums and creative publications before his eventual migration to the Retail, Footwear and Apparel industry.Having previously served as WhichPLM’s Editor, Ben knows the WhichPLM style, and has been responsible for many of our on-the-ground reports and interviews over the last few years. With a background in literature, marketing and communications, Ben has more than a decade’s worth of experience, and is now viewed as one of the industry’s best-known writers.