Managing product safety and social compliance into large, long-lead-time projects is something that many suppliers and distributors who purchase factory direct have become fairly adept at doing. Most of these efforts have been driven by their end buyer customers’ expectations as part of Fortune 1000′s focus on protecting their brands. If there are both the time and a large enough order size, it is possible to schedule a third-party factory audit and have pre-production and perhaps even final production samples sent out for testing-and still hit the delivery dates.

The real challenge in our industry is the day-to-day orders. It’s not easy to find suppliers that can demonstrate through their documentation and validated processes that product safety and social compliance is a part of their in-stock inventories, which are used for the smaller quantity, shorter lead-time orders that make up so much of the industry’s business.

I’ve heard various estimates of the average order size and lead times for projects in our industry. For the sake of the title of this post, let’s base our assumptions on an average order of $500 and delivery within 10 days. From a compliance standpoint, this position is still valid even if the average order size was $5,000 and the delivery time was three weeks.

It is either impractical or impossible to reactively manage product safety or social compliance into inventory you already own in these small quantities and short lead times. Here’s why: If compliance was not a primary focus when you placed the order with the factory, it probably doesn’t exist. Plus, it costs way too much to provide testing reports on small-quantity orders should you have time to wait for test results before shipping the order. Depending on the product, the costs to rush the testing could be higher than the profit from the order.

The issue is further complicated by the nature of our industry where suppliers inventory blank goods and decorate in smaller quantities on demand when distributors place orders. Even if suppliers were on top of their supply chains and did any testing required to ensure safety and compliance of the blank goods, these blanks are then subsequently decorated to create the final product. This decoration materially changed the product and, as such, requires either new testing or component-level testing on the inks used in decoration.

In other words, while the product could be tested for safety, the inks could not-rendering the entire product unproven or unsafe. Don’t count on your Fortune 1000 clients accepting the statement, “We think the product is mostly safe, but we don’t have time to test all of it before your event.” No way.

So how much would it cost to test each of your inks once a year? Roughly, in the mid five figures. Because of the wide range of ink colors used, I’ve heard estimates as low as $30,000 and as high as $75,000. This cost is one of the reasons why ink companies historically have not been eager to provide test results. If the results do in fact exist, oftentimes the testing was done many years ago as a part of the ink’s development protocol and the results are out of date for today’s compliance standards and regulations.

This is an important consideration because if those inks are used on children’s products or products that could potentially transfer these inks to the skin and be absorbed, they must be tested under CPSIA guidelines or, at the very least, be labeled in compliance with California Prop. 65 guidelines.

Here’s the catch: The ink company is not making the testing and/or labeling decisions, you are. So, if you tested the blanks, had component-level testing of the inks and had a process in place to ensure the product was decorated with the inks that had been tested, then you would be okay from a product-testing standpoint. If not, you could be in trouble.

Unfortunately, whether you want to admit it or not, nearly everyone has a story of a large project where the client’s demand for auditing or testing came very late in the project. I’ve heard many stories throughout the years where this has happened to some very good suppliers. I can’t image the lesser suppliers in our industry are any better. I’ve even received some panicked calls asking for help with finding a solution while the order was in production, in transit from overseas or, worst case, sitting at the client’s event.

You get what you ask for and pay for. If you make product safety and compliance part of the upfront criteria for which suppliers you use, there’s a much greater likelihood of getting it when you need it.

Brent Stone is executive director – operations for Quality Certification Alliance (QCA), the promotional products industry’s only independent, not-for-profit organization dedicated to helping companies provide safe products. A Six Sigma Black Belt, Stone has more than 25 years of in-depth supply chain management experience with extensive expertise in process design, development, improvement and management. He can be reached atbrent@qcalliance.org or visit www.qcalliance.org for more information.

Throughout the past few years, I have had many conversations with companies who understand and use World Responsible Accredited Production (WRAP) and Fair Labor Association (FLA) certifications as their compliance programs. These companies are to be commended for making it a practice of using WRAP or FLA certifications as part of their factory qualification process, and on some level this makes sense. These are good programs, so why would you go through the trouble and expense of building your own compliance program when you can tout something that your factory has accomplished?

While these programs have merit, they just address one area of compliance—and they may not transfer through to your organization. While social accountability is a good place to start being compliant, these programs don’t constitute a true compliance program. Here’s why (but first, a little background):

Driven by the shoe and apparel industries, WRAP is a factory level program that has been around since the late 1980s and could arguably be considered the predecessor to the Corporate Social Responsibility programs (CSRs) many Fortune 1000 companies now have in place. Most of these CSRs embrace the UN Global Compact’s 10 principles in the areas of human rights, labor, the environment and anti-corruption. These principals are the primary factors being evaluated in social responsibility audits. FLA is somewhat similar in scope, gaining traction mainly in the collegiate marketplace and through support of organizations such as Nike and Adidas who are heavily invested in this space.

It’s also common to run into companies who are using Social Accountability 8000 (SA8000) as their basis for social accountability audits. SA8000, in effect, is a checklist for what a universally recognized social accountability audit should include.

So why are these programs only a good start instead of a complete solution? Well, WRAP and FLA, for instance, are generally factory level certifications that focus solely on social accountability. In other words, if you are using only WRAP and FLA, you could very well be outsourcing your compliance program to your factories—giving them all the control while putting you at risk for any noncompliance.

The same approach is also being taken by hard goods companies when they refer to using a Disney or Coke certified factory. No doubt these audits imply a sense of the factories capabilities in the areas of compliance, but this does not mean a comprehensive compliance program is in place. Rather, these factories have been audited to the specifications Disney or Coke have in place. As I’ve mentioned in a previous Compliance Chat blog post (“Picture Day” – Why Factory Audits Aren’t Enough), there are many issues with using audits and only audits as your compliance program.

Social accountability regulations such as California Prop. 65 have been embraced and around long enough that they have almost become entry-level compliance standards. But the introduction of the Consumer Product Safety Improvement Act (CPSIA) as well as state-level product safety regulations changed the game. Social accountability is no longer enough. Today, having a comprehensive compliance program that not only includes product safety but also addresses your clients’ corporate social responsibility needs is essential. You are making a major blunder if you outsource product safety, social accountability or any other aspect of compliance.

WRAP and FLA are great programs that address social accountability, and they are a good place to start the compliance journey. However, you must understand that they are a component addressing one area of a comprehensive compliance program, which should also include product safety, product quality, environmental stewardship and supply chain security.

If you have ever worked with any of the Fortune 1000 companies that have their own compliance teams, you realize they rarely outsource the responsibility for compliance to the factories that are manufacturing products on their behalf. Rather, they retain control to ensure the compliance standards they have set for themselves are truly being met. Learn from their best practices, and you’ll be headed in the right direction.

Brent Stone is executive director – operations for Quality Certification Alliance (QCA), the promotional products industry’s only independent, not-for-profit organization dedicated to helping companies provide safe products. A Six Sigma Black Belt, Stone has more than 25 years of in-depth supply chain management experience with extensive expertise in process design, development, improvement and management. He can be reached at brent@qcalliance.org or visit www.qcalliance.org for more information.

I was chatting with a leading industry distributor recently, and he expressed frustration when it comes to the issue of compliance. He regularly has to field compliance inquiries from his customers, and the wide range of responses he gets from suppliers leaves him feeling discouraged. And he’s certainly not alone. Based on the conversations I’ve had with other distributors, there is little understanding regarding the complexities of compliance.

To assess if he is on the right track, this distributor asked me, “When do know that you have enough compliance?” It’s a valid question, and one that has an easy answer: When your response is more than enough to meet the expectations of your clients, then you’ve achieved the right amount of compliance.

End-buyer clients are driving the compliance train. But some issues of compliance are more important than others depending on the client’s needs and personal preferences. You’ll see this manifested in the various types of compliance information that clients request. The only way to be able to field these requests effectively and efficiently is to have a proactive, comprehensive compliance program that addresses ALL the issues.

For many distributors, compliance has yet to become a big deal to their clients. If your clients do not care, you probably don’t care either. But that’s not to say that compliance shouldn’t be important to you. It absolutely should. More and more companies are finding out first hand that having a comprehensive compliance program is making a difference in their relationships and businesses, especially when it comes to their Fortune 1000 clients.

But here’s the problem: Many suppliers feel like they are doing enough. Some have started doing factory audits. While conducting audits is important as a component of a compliance program, audits on their own don’t come close to being a compliance program. See what I mean in a previous post: ‘Picture Day:’ Why Factory Audits Aren’t Enough.

Other suppliers have starting testing their products. Again, testing is important as a component of a compliance program, but testing alone is not sufficient. Check out the post The Golden Sample: Why Testing Alone Isn’t Enough to learn more.

The majority of purchases in our industry are small-quantity, short-lead-time orders. If compliance is not included in your offering before the order is placed, it will be very difficult and cost prohibitive to manage it into a $500 order than ships in three days.

At best, it might be possible to have blank product tested before it is shipped, hoping that the inks used did not contain any lead or cadmium. But how would you know if you didn’t test them? The ink companies have stated that they do not manufacture a children’s product and at best have offered outdated testing. They too, feel that they are doing enough.

In this instance, your Fortune 1000 clients will receive a product that may or may not meet product safety requirements. Only one component of a compliance program was covered. You still have not addressed social compliance, product quality, environmental stewardship and supply chain security. It’s not enough for Fortune 1000 customers.

Here’s another example. More and more apparel suppliers have begun relying on WRAP (Worldwide Responsible Accredited Production) or FLA (Fair Labor Association) certifications, with some even making them a requirement for the factories with whom they work. WRAP and FLA certifications are factory-level accreditation programs that focus almost exclusively on social accountability. While it is a great step in the right direction for factories to be audited on social accountability, this type of factory certification does not pass through to you. And even if it did, only one component of a compliance program is covered. Again, product safety, product quality, environmental stewardship and supply chain security have not been addressed—and that’s not enough for Fortune 1000 customers.

As you can see, the reality is that very few suppliers are actually doing enough. Factory audits alone are not enough. Testing alone is not enough. Social accountability certifications alone are not enough. If you are doing business with companies that think any one of these is enough to be compliant, they are wrong—and you and your customers are at risk.

So, how much compliance is enough? Only your customers can dictate the answer to this question. Understand that you’ll receive a variety of compliance requests from your customers, and be prepared to meet these requests be having not only a proactive compliance program but also a comprehensive compliance program that covers product safety, product quality, social accountability, environmental stewardship and supply chain security in place. Only then, will you truly be compliant enough.

Brent Stone is executive director – operations for Quality Certification Alliance (QCA), the promotional products industry’s only independent, not-for-profit organization dedicated to helping companies provide safe products. A Six Sigma Black Belt, Stone has more than 25 years of in-depth supply chain management experience with extensive expertise in process design, development, improvement and management. He can be reached at brent@qcalliance.org or visit www.qcalliance.org for more information.

Last week, I had the opportunity to meet with a number of distributors and their end-buyer clients to discuss at length their compliance philosophy and growing focus on compliance programs. These corporate customers made it crystal clear that compliance programs are not only a critical component but also a differentiating variable when selecting distributors to create their promotional programs. Additionally, these buyers shared their intent to consolidate the number of distributors with whom they do business down to those that can demonstrate the knowledge of and the ability to deliver safe and compliant products.

Clearly, this consolidation is not going to happen overnight. But the movement is picking up steam across a large number of Fortune 1000 companies. Much of this is driven by what seems to be a weekly national news focus on companies who are perceived to be dropping the ball on product safety or compliance issues. For example, just two weeks ago the Detroit Free Press reported “Another Shipment of Toxic Toys Turns Up in Detroit.” And back in January, The New York Times published “In China, Human Costs Are Built Into An iPad.” And these are just a few of the many headlines that have captured much media attention.

Another interesting thing happened at last week’s meetings: the conversations underlined the reliance that both Fortune 1000 customers and their distributors have on their supplier partners to actually deliver compliance. As manufacturers or importers of record, industry suppliers bear the majority of the responsibility for introducing safe and compliant products into commerce. However, distributors functioning as the industry’s sales team also have a growing role in connecting the supply of safe and compliant product with the demand coming from corporate America.

Regardless of the issue, the best solutions to complex problems have always been found through a collaborative effort. And this is true in our industry; it truly takes a village to successfully deliver product safety and compliance.

Compliance programs have become a differentiator that is prompting new levels of partnership between end-buyers and our industry distributors and suppliers. It was interesting to hear from both distributors and their customers last week that while cost continues to be critically important, the cost conversations are more often taking place with those companies who can first deliver compliance. In other words, if you can’t deliver safe and compliant product, you are not even in the conversation—and most likely don’t even realize the opportunities you are missing.

The market has clearly moved. More suppliers are seeing the opportunities compliance brings. And while there are challenges and costs associated with compliance programs, these suppliers are now running toward compliance as part of their overall business strategy. You can see what I mean in the previous blog post “A Race To The Top Via Safe And Compliant Products.”

Corporate America is paying attention to compliance, and these companies are doing a much more thorough job of vetting their distributors. Those who can deliver safety and compliance make the cut. Those who can’t are finding themselves getting left behind or left out, and it is brutally difficult to win back business that was lost due to the absence of a compliance program.

Because distributors offer thousands of products, there’s little, if any, chance of them having the knowledge or expertise on the requirements for each category. Recognizing this, they have turned to the supplier experts they can identify and are leaning on them to educate both their organizations and their Fortune 1000 clients on all aspects of product safety and compliance. It’s very difficult to be good at everything, and these distributors see the immense value of having suppliers who can function as their experts in this area. These deeper and more frequent interactions are opening up new opportunities for all involved parties.

Distributors recognize the spike in inbound compliance expectations, and they are placing increased importance and value on the supplier partners they select. They realize that a supplier’s ability to deliver safety and compliance often indicates a higher level of performance across the board.

These distributors are going on offense—and they’re voting with their purchase orders. These companies realize that the only thing a preventative defense does is prevent you from winning. Many industry companies reactively rely on testing or auditing as their only compliance solution, and this is no longer sufficient. Resisting the compliance movement is futile.

Like their Fortune 1000 customers, distributors today are faced with some hard, objective decisions regarding whom they can do business with, and compliance programs are a big part of the criteria. It takes a village to meet the needs of Fortune 1000 companies, and those who know their role and how best to play it are winning business seven figures at a time.

Brent Stone is executive director – operations for Quality Certification Alliance (QCA), the promotional products industry’s only independent, not-for-profit organization dedicated to helping companies provide safe products. A Six Sigma Black Belt, Stone has more than 25 years of in-depth supply chain management experience with extensive expertise in process design, development, improvement and management. He can be reached at brent@qcalliance.org or visit www.qcalliance.org for more information.

Originally published by Promo Marketing on March 9, 2012.

Our industry seems to be struggling with the question of whether or not to commit time, effort and money to developing compliance programs. It’s an oversimplification, but you can group our industry into five basic categories on this topic:

1. The Early Adopters
“It’s the law. It’s the right thing to do. My customers expect it. It’s a good business decision. I’m going to embrace it.”

2. The Curious
“What do I need to do, and how much is it going to cost? When the ROI proves out, I’ll probably develop a program.”

3. Those Who Rationalize
“I test most of the time, and I do factory audits when my clients request them. Not all of my customers are asking for compliance. What I am doing is good enough.”

4. Those That Resist
“Compliance costs way too much. It doesn’t apply to my company. It’s someone else’s issue; I don’t make the product. Clients just want low costs no matter what.”

5. The Blissfully Ignorant
“Huh? Never heard of it. I’m simply not paying any attention to compliance.”

Outside of the early adopters and the curious, whom I believe will eventually come around as market share moves to those companies who demonstrate they have a compliance program to end-buyers, the position the majority of the industry is taking baffles me. Why wouldn’t we want to raise our standards? Why wouldn’t we introduce quality and safety into our solutions?

I get that product safety and compliance programs are hard. I get that you either have to put a sharp cookie on point for building these programs or go out and hire one. I get that you cannot have a compliance program for $500 a year. What I don’t get is why people don’t see the value of every company in our industry having one.

Maybe it should be required as an entry qualification for being in our industry? Most industries, after all, require at least some sort of minimum standard or certification to be met in order to do business in said industry. Why would we resist this? Aren’t we supposed to be enhancing companies’ brands rather than putting them at risk?

Being really good at anything is a good business decision; being better than your closest competitor at something will have a positive impact on your revenues. I spent more than 15 years at Nordstrom in various roles, ultimately ending up in regional merchandise manager and store manager roles. There are few people who do not know the relationship Nordstrom has with customer service. I had many, many opportunities to witness firsthand the value the company’s commitment to service, which was evident in its loyal following and positive sales results. Providing great service was easy. Everyone else was doing it, and it worked.

Having said this, I recall one regional meeting when the GM asked the assembled leaders if “Nordstrom is in the customer service business.” Most of us lemmings quickly agreed that Nordstrom is indeed in the customer service business. Wrong answer.

You see, Nordstrom sells shoes, pantyhose, lipstick, shirts and pants. The company’s product is not customer service. Rather, its reputation for customer service is the vehicle through which Nordstrom’s generates long-term, profitable sales. Maybe a comprehensive compliance program is your vehicle?

Sticking with the customer service theme, what happens if you blow it these days? Here is a pretty compelling YouTube video on what happened when United Airlines blew it.

As the story goes, United damaged a guitar from the band Sons of Maxwell when they were flying to a gig, and Dave Carroll, with whom I have spoken, tried valiantly to get United Airlines to repair or replace the guitar. After getting repeatedly blown off, he promised United Airlines that he was going to write a song and post a YouTube video on the experience. No big deal, right? The answer depends on whom you ask.

So far, there have been 11,638,453 views of this video. Put another way, there have been 11.5 million negative brand impressions for United Airlines. Some of the legible comments on the video will give you a sense of what kind of impact this has had on the company’s business.

My question is, will your end-buyer clients be the next “United Breaks Guitars” example because you put their brands at risk by not taking the steps to ensure they were getting safe and compliant products? If you’re not in the early adopter group mentioned above, the answer to the question is not a comfort either to you or your customers. You are missing an opportunity to provide a solution to them that few others can and you are also at risk of losing their business to someone who does have a compliance program to offer. Fortune 1000 companies expect us to protect their brands, are inserting compliance into RFP’s and making this a requirement for the companies they are doing business with.

Just yesterday, I heard a comment from a Top 50 distributor whose client attended The PPAI Expo illustrating my point. She was disappointed to see little if any focus on product safety and compliance when walking the show floor. It is clear to me that those few companies who can deliver a comprehensive compliance program have the inside track for winning her seven-figure promotional products business and that is exactly the point I am making. Product safety and compliance programs as a part of a sound business strategy are returning value to your organization above and beyond doing the right thing for your customers, not unlike customer service moves the gauge for Nordstrom.

Brent Stone is executive director – operations for Quality Certification Alliance (QCA), the promotional products industry’s only independent, not-for-profit organization dedicated to helping companies provide safe products. A Six Sigma Black Belt, Stone has more than 25 years of in-depth supply chain management experience with extensive expertise in process design, development, improvement and management. He can be reached at brent@qcalliance.org or visit www.qcalliance.org for more information.