How To Cope With Diverse Customer Compliance Standards

When it comes to compliance and product safety policies, many customers like to reinvent the wheel. If you are facing this kind of situation with one or more customers, creating solid policies and a dynamic supply chain is the best way to manage.

Whether the company is Coca-Cola or Google, where it lands with its compliance policy depends on a lot of variables—the products it makes, the markets it sells to, even its politics. While one company may be happy to buy a product with little to no testing, another company may require the same product to be tested as though a baby would chew on it. For many distributors and suppliers, it’s increasingly harder to satisfy all the people all the time.

This variability has a lot to do with a company’s risk tolerance. The avoidance of risk drives a lot of compliance policy decisions, and companies that have had a recall or safety issue in the recent past will typically be much more demanding of their vendors. While some companies might be OK with an outdated test report, others may want to see testing on the same batch of products they are buying.

Many of us offer a wide variety of products, from simple shopping bags to complex electronics—and each one of the products has its own collection of legal requirements and/or industry standards. Some product requirements are straightforward—such as for kids’ items or products that hold food. Other product requirements, such as for electronics, are not so clear. They might have few legal requirements, but electronics have strong voluntary requirements that have a big impact on safety. Every one of your customers may have their own idea on what standards to adopt.

Creating a supply chain that can cope with differing customer requirements is a real challenge. It takes a robust compliance program, supply chain transparency and a dynamic sourcing team that can react quickly. Here are some areas to focus on to help you meet the challenge:

Do a product risk assessment. A standardized, documented review of each of your products is a key step. A proper assessment not only ensures you identify all potential risks, it also allows you to define possible legislation and industry standards that may apply to your product. Most importantly, it allows you to anticipate the standards and testing your customer may want, and guides you on how to discuss these with customers from an informed position.

Know your customer. Consider the brand values of your potential customer. Does the brand have anything to do with the environment, health or children? If so, chances are their compliance requirements will be much higher and you’ll want to pitch them products that have high compliance standards. Also, consider if they have had recent issues with products in the marketplace, as this usually affects their risk tolerance.

Set a compliance baseline. Take stock of your bigger customers and make sure your standard testing policy is up to their expectations. Testing to the legal minimum should be the starting point and helps ensure you aren’t introducing regulatory risk to your customer’s supply chain.  A few years ago the “legal minimum” would satisfy most customers, but this is rapidly changing.  Many industry standards are now considered a minimum requirement even if not legislated. On top of that, compliance to many laws, such as California’s Proposition 65 and Illinois’ Lead Poisoning Prevention Act, can be tackled in different ways.

Segment your product line. One strategy that many companies have adopted is to split up your product offering based on compliance. For example, if you have a big-brand customer that treats everything as though it’s a children’s item, it may be worth it to test a larger portion of your product line to the CPSIA standard to capture more business. Another tactic is to provide Proposition 65 protection to a line of products for those customers that ship to California but don’t like to apply a warning label.

Scrutinize your lab proposals. It’s as important to know when to say “no” as it is to say “yes.”  Many labs may blur the line between testing that is mandatory and just a best practice. You might end up with a Cadillac testing plan when all you need is one suited to a Kia. Make sure you get an itemized list of each test method and understand what law or industry standard it is designed to meet. This will help keep costs down as your testing activities become more complex.

Guide your customer. Often client companies have a compliance standard that they don’t really understand. In some cases, they’ll appreciate some pushback and updates if there is good reason to do so. In many cases this can help save on testing costs as well as widen the types of products they can include in their program. In the end, you may be able to lead your customers to a different place from where they started, as well as giving you an opportunity to impress.

Consider screening technologies. Having quick, in-house testing technologies can give a company a way to quickly prove that their products are safe. In some cases, when a customer has a compliance requirement not based on legislation, a quick scan by an XRF analyzer or portable FTIR testing equipment may be enough to satisfy the requirement without the need for expensive and time-consuming third-party testing.

Over time you may develop compliance strategies for each customer and end up with a complex web of requirements. And we haven’t even discussed social compliance yet, which also brings another level of audit formats, documentation and expectations.

In the end, we may be setting up small, separate supply chains for each major customer that produces products to specific standards. To do that well, a company needs in-house compliance expertise, close factory partners and a culture of transparency. Companies that are successful at this should be well positioned for the next five years as the promotional products industry evolves.

Josh Kasteler is director of product integrity at distributor BAMKO. Reach him at jkasteler@bamko.net.