What’s the most common response distributors receive when asking suppliers if their products are safe? “We have tested our product.” Yet in spite of this testing, I’ve heard countless stories from distributors and suppliers alike about how they have had to refuse product during the warehouse receiving process because inspection or random testing revealed that the product failed to meet required safety standards. While this is certainly a problem for the shipment in question, the issue is much broader. Who’s to know how many other suppliers have received unsafe blank goods from the same factory as in the above example?

Of course, requesting product safety testing results from the factory about the specific item it is making for you is a natural first step. Seems easy enough, right? Unfortunately, the factory will routinely send you an outdated test report that often was done on a different, but similar, product. I’ve witnessed this firsthand, having once received an eight-year-old test report written in Chinese on a product that was only vaguely similar to the product I ordered.

And, sadly, I’ve heard of many worst-case scenarios for distributors where clients did their own testing after receiving the product and the product failed testing miserably. After all, what’s a little lead—actually a lot, 7,200 ppm—have to do with getting a safe travel mug?

I have a pretty good idea of the effect these issues have on the relationship with your customer. These are among the many reasons that end-buyer clients take a “trust-but-verify” approach to product safety and compliance. They can’t depend on us to reliably provide it, so they must validate it themselves at great cost and inconvenience to all parties involved.

How do these situations happen? I think there are three primary reasons:

1. There is an assumption that someone knows not only what the product requirements are but are also meeting them.
2. There is a “golden sample.” Factories knowingly send samples they know will pass testing into the labs, and no one took responsibility to verify that actual production matches pre-production sampling.
3. There is an over reliance on product testing as the only vehicle for delivering safe products.

In terms of product safety, we get what we measure. The things we measure, ironically, tell our supply chain what we value. If we do not know what product standard to measure/test against or how to ensure production matches the golden sample sent in for testing, we are left with trying to put our Humpty Dumpty project back together again after it has fallen off the proverbial wall.

On a side note, even if we deliver safe products we must remember product safety is only one part of the equation. While product recalls are drawing much attention these days, historically, more big companies have been tripped up by social accountability issues rather than product safety problems. This has become such a concern that most Fortune 1000 companies now have some sort of Corporate Social Responsibility (CSR) program. There are even published lists of the alleged worst offenders, which I imagine does wonders for the stakeholder stock price.

Testing or factory audits are certainly best-practice steps to measure the effectiveness of your compliance program. But in and of themselves, testing and factory audits are not a compliance program. The CPSC has given some direction on what should be done in the presentation“Reasonable Testing Program & Third-Party Testing.”

The goal of a testing program is to create a reasonable certainty that all manufactured products comply with rules, standards and bans. The components of this program include:

1. Product Specifications
2. Certification Testing
3. Production Testing
4. Remedial Action Plan
5. Documentation

Testing must be proactive. Testing must be current. Testing must be specific to the project you are manufacturing if you have changed that product by putting a logo on it. I’m not aware of any ink suppliers that offer current test reports on their inks. So in the absence of their component testing, you are obligated to test these inks yourself. Product testing must be a component of your product safety and compliance program rather than an end-of-the-game “Hail Mary” to see if product safety exists.

To help you determine if your supplier partners are following the CPSC protocol, ask these questions:

• What is your testing program?
• What is your social accountability program?
• How do you develop the product specifications that you give to your factories?
• What are your checks and balances to ensure production matches the tested sample, and where does this take place?
• What happens when a product fails testing?
• What steps do you take to correct the manufacturing process?
• Heaven forbid it should ever be needed, but what is your product recall process in case something slips through?

If your supplier can send documentation within an hour or two, it has a proactive compliance program. If it takes a day or two, the policies are most likely being quickly written so the info can be sent to you. If the supplier says, “Huh?,” we wish you luck and hope you have a big product liability policy because we’ll be hearing or reading about your customer in the headlines soon. Let’s hope your relationship with that customer and your business survives this inevitability.

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 info

Like success and life, product safety and compliance programs are about the journey rather than the destination. Compliance programs are not a black-or-white, pass-or-fail, all-or-nothing exercise. I’ve heard plenty of skepticism from people on the veracity of other companies’ efforts when perhaps an inward focus on what is actually within their control is warranted. Who knows, maybe those comments are a defense mechanism that allows them to deflect attention away from their own potential shortcomings.

I regularly hear questions or concerns about those companies who are on the product safety journey. Perhaps these comments are misplaced. Rather, we should be not only giving credit to companies that admit they need to get better in an area so critically important to Fortune 1000 companies, but also applauding the fact that these companies are actually doing something about it. Product safety and compliance efforts are not easy, nor are they inexpensive. They carry with them the associated costs and pain that so often accompanies meaningful change. These companies are making our industry better, and we should be encouraging their efforts to improve themselves and build the overall reputation of our industry.

A robust compliance program is a pretty good window into the overall quality of an organization. These programs are a reflection of a company’s ongoing commitment to you, its customer. They also provide key insights into the overall quality and character of the company you are choosing to do business with. Does the company value the relationship it has with you? Does it value the relationship you have with your customers? Is it focused on growing your business? Or does the company just want to sell you more stuff? Seriously! Is it really an unfair expectation that the products you sell do no harm? That the products do not jeopardize the health or safety of recipients? We’re supposed to be enhancing our clients’ brands, not putting their brand reputation at risk.

If a company values the relationship, it will be passionate about making you look better to your customers. It will be committed to being better than the average in the things it does. It will be embracing change as a path to long-term success rather than fighting to maintain the same old tired offering. It will have a comprehensive product safety and compliance program, and it will be able to both quickly demonstrate the program exists to you and explain why it is important to your customers. The company will have product liability insurance and a process in place that prevents the insurance from ever having to be used.

Having a rigorous product safety and compliance program is not unlike an insurance policy. It’s hard to argue that car insurance is not important. Many states require it as a condition of getting a driver’s license in an effort to protect us from ourselves. But having car or health insurance does not mean that something bad is guaranteed from happening. It just means that if something does happen, it doesn’t destroy everything that we have worked so hard to build. It means that you are more responsible and have some protection from the knucklehead texting on the freeway next to you. I choose to align myself with those companies who are committed to exceeding their customer’s expectations on compliance matters and am excited about the rapidly growing ground swell of distributors who are now voting in support of compliance programs via their purchase orders.

To me, the critical issue is that these companies have cultures that value product safety and are taking steps to improve themselves. The question shouldn’t be whether they are perfect or not. The question should be why aren’t you, as demonstrated by your actions equally committed to meeting the demand for safe and compliant products?

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.

To say 2011 was an interesting year for business would be an understatement. Unless you were unplugged from every source of news and information, it was impossible to have missed the unprecedented global changes that are impacting every industry and the worldwide markets. Specifically to the promotional products industry, we’ve been hit hard by raw material cost increases, changing demographics in China, public budget cuts for swag, and continuous building of pressure on our supply chains through supply and demand as well as evolving product safety and compliance regulations.

Our industry is going to be hard-pressed to continue to thrive during the next decade if we do not take a hard look at our business models and best practices. Perhaps these outside influences are telling us that it is time for some (or all) of us to evolve.

Thus, there has never been a better time to get serious about your strategic plan for success. Companies that can best identify where and how to compete and then quickly implement a strategy to address these opportunities will have the tools to thrive throughout the next five to 10 years. And differentiation is a key component. A strong, specific strategy for differentiation in our crowded marketplace may be what determines if your organization can weather the ongoing storm of forces bearing down on our industry. To see what I mean, check out the previous post “Are You Meaningfully Different.”

Why is your strategic strategy so critical this year? In addition to the unprecedented outside influences mentioned above, there are few industries that face more internal competitive forces than the promotional products industry—and all of these forces are getting stronger.

An article in the Harvard Business Review, “The Five Competitive Forces That Shape Strategy,” by Michael E. Porter illustrates this point. Porter’s excellent commentary addresses some of the critical underlying issues our industry faces, issues that place pressure on profitability and make developing a competitive advantage to combat these forces at a premium for long-term success.

Porter’s article identifies five competitive forces, to which I’ve added my comments on why they accurately describe our industry:

1. Threat of New Entrants
Unlike most markets, the promotional products industry has virtually no qualifications or barriers to entry on either the supplier or distributor side of the equation. This competitive force is unusually strong for us.

2. Rivalry Among Existing Competitors
With most companies offering much of the same thing and little, if any, differentiation, there is intense rivalry between both supplier and distributor competitors for the same market share. In spite of any industry reports that state otherwise, I find it hard to believe that our market is actually growing in this economy.

3. Threats of Substitute Products or Services
It seems as if there isn’t any industry supplier that doesn’t sell travel mugs, bags or writing instruments. The absence of core competencies within our industry and the myriad of advertising options outside of our industry render this force strong as well.

4. Bargaining Power of Buyers
With virtually the same product being available from thousands of suppliers or distributors, someone will ultimately drop their drawers in order to win the order. End-buyers know this and use it successfully to their advantage. This force is also unusually strong.

5. Bargaining Power of Suppliers
This is where the squeeze really hits our industry. In addition to raw material cost increases, the mounting product safety and compliance regulations mean there are fewer factories that can actually deliver the quality we require. If you do not have a strong core competency and long-term relationships with key factories, your buying power is less than that of your customers. This places your margins under constant pressure.

There are too many industry firms that are unable to compete on anything other than cost, and these companies put our entire industry at risk. Those that can identify core competencies, differentiate themselves and break out of the old industry mold are the companies that have the most potential to thrive.

Suppliers, I hope you have not only developed your core competency and competitive differentiation but also are including it on your 2012 strategic plan. Distributors, I hope your to-do list is topped with qualifying suppliers and developing product solutions that also protect your customers’ brand equity. It’s time to reward suppliers that can do this, and the best way to cast your vote is with purchase orders. Either way, best wishes for developing and executing your 2012 strategic plan and having continued success throughout the new year.

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’m often asked which product categories pose the highest risk for causing harm to people and damage to an end buyer’s brand. My typical answer applies a reasonable amount of common sense. It is fairly obvious that products appealing to children or those being ingested or coming into contact with our bodies carry more risk than other categories. As such, you should be very concerned when purchasing toys, food, personal care products and drinkware categories.

While the above items are of primary concern, that doesn’t let others off the hook. Any product category is susceptible to social accountability issues and the resulting scandal from a Fortune 1000 company receiving products that are manufactured in a facility that does not adhere to the UN Global Compact and violates human rights and/or child labor principles.

The more often people ask about product category risk, however, the more I am convinced that product category alone is not the proper way to identify risk. It is certainly a major factor, but you can purchase a low-risk product from a high-risk supplier and find yourself in the same mess. And it’s also possible to buy a high-risk product from a low-risk supplier and get hurt.

There are multiple factors that should be taken into consideration when determining risk. One of the most critical aspects is core competency. When evaluating core competency, ask these questions:

• Does the supplier I am purchasing from know anything about the product, or is the company just good at selecting merchandise at the Canton Fair while in China?
• Is the product category a core competency for the company; meaning, does this supplier specialize in this specific type of goods?
• Does the supplier know where and by whom the product is actually being made as well as what standards of quality and safety are being used?
• Does the supplier have transparency and control of its supply chain?

The reasons questions such as these are important is because there is too much sourcing through trading companies who know a guy who can find a factory that can make it in China. After all, China doesn’t exactly have the best track record when it comes to food and personal care items, as demonstrated in the article “China Seizes 26 Tons of Melamine-Tainted Milk.”

So how does this play out in our industry? Here’s an example: A supplier known for manufacturing writing instruments expands its line by adding mints, personal care items and drinkware to its product offering. This supplier, like many others in the industry, is following a proven path to growing its business. The company can either sell more merchandise to its existing customers or it can develop new products and win new customers—both of which are much more difficult, and expensive, to accomplish. Knowing this, the company adds new product categories to its offering and sells these new categories to existing customers. Unfortunately, this strategy does not grow the overall industry volume through ingenuity or creativeness. Rather, all it accomplishes is one supplier carving into another supplier’s market share, resulting in further commoditization of that product category.

Let’s take the antibacterial hand soaps that you are buying from your best writing instruments supplier as an example of why you might want to instead purchase from a company who has personal care products as a core competency. There are a number of questions a supplier should ask before getting into this product category:

• Is this product a drug?
• Is it an over-the-counter drug?
• Is it a cosmetic?
• Is the item a soap or hand wash?
• Are medical claims being made, and how does this impact the requirements and labeling?
• Where is the product made?
• Are there any restrictions in shipping the product via air if it contains alcohol?

Shouldn’t you know these things before putting customers’ brands on the packaging? And these are just a few of the questions that need to be asked. More can be found in this Guide To The Regulation of Antibacterial Hand Soaps from ISSA—The Worldwide Cleaning Industry Association.

Adding new categories outside core product lines without taking the requisite steps to develop expertise above and beyond how to decorate the product is risky business for suppliers, distributors and their end buyers. Having expertise at manufacturing bags does not automatically make a supplier good at everything else. Each product category requires specific knowledge bases and skill sets. And the greater the risk within the product category, the higher the premium is on how suppliers source. For more on supply chain transparency and control, check out this previous blog post.

The good news is that some suppliers who have added new product categories are actually doing their homework. They have invested the time and resources to understand the requirements for these new products and have developed a new supply chain to meet these requirements.

Even better news is that, every day, distributors are becoming more adept at indentifying risk and valuing those suppliers who actually have core competencies. It’s something to think about as you walk the aisles and see all the new product offerings at The PPAI Expo 2012 coming up in January.

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.