A First Step Toward More Industry Transparency—And That’s A Good Thing

Picture it—it’s a Friday afternoon and your mind is already focused on the weekend. Suddenly you get an email from one of your biggest customers with the subject heading, “compliance questionnaire.” The attachment is an innocent-looking, three-page document that asks a number of questions about product safety, social compliance and regulations. No big deal, right?

Actually, it is a big deal. These types of questionnaires (and documents like them) are making their way around our industry more often these days, and you may have gotten a few already. They are primarily being pushed by our industry’s largest corporate customers who are starting to put a bigger spotlight on the safety of what they buy.

Product safety is an issue that affects both distributors and suppliers. Suppliers may do much of the heavy lifting when it comes to compliance, but distributors also need to have processes in place to curate the best products for their clients. Suppliers and distributors that work together are able to provide better information about how products are made and tested.

End users may now work with several distributors and suppliers simultaneously in search of the hottest (and perhaps least expensive) products, but that is changing as companies are increasingly looking to consolidate their buying with a limited number of vendors. This not only saves them money, but makes it easier to manage risks to their brand.

This push to consolidation brings opportunities to forge strong, high-volume contracts with the biggest fish. But for every winner, there will be several more companies that won’t make the cut and will be shut out of lucrative programs. Increasing regulation (and litigation) and recent, embarrassing recalls are making compliance more of a requirement to do business.

A few years ago your completed questionnaire may not have been read, but these days it will likely be carefully reviewed and graded. Those who do well will be at the top of the list for business and those who do not will be at the bottom or cut altogether. Therefore, your answers to the questions need to be informed and backed up by documentation to impress. It sounds a lot like high school all over again—you’ve got to show your work.

Your questionnaire grade translates to how risky your company appears to your customer, and that amount of risk will dictate the level of business they give you. Those who get a poor grade will be considered risky and it can be a long, uphill battle to change that. In some cases, risky vendors are required to undergo expensive audits and other improvement schemes in order to get back into good graces.

Here are some guidelines to help you prepare for the next customer questionnaire that lands in your inbox:

• Product Safety: The last thing your customers want is to have their brand placed on a dangerous or recalled product. Here are a few fundamentals they will look for:

o Product Assessments Do you have experts to evaluate new products before you purchase or develop them? Do you anticipate any hazards with those products and, if so, do you have a testing program to check them?

o Testing Can you provide recent test reports to confirm the products don’t contain any regulated harmful chemicals? Can you track the testing to the actual product lot from the factory?

• Social Compliance Today end users increasingly want to treat your supply chain as part of their own. Here are a few must-haves:

o Code of Conduct Do you have a code of conduct and require that all suppliers sign it? Is it implemented up the supply chain? Does it meet the industry standards of organizations like the Fair Labor Association and other major consumer brands? (You can adopt the PPAI Code of Conduct as a good first step. Find it at www.ppai.org/code.)

o Factory Audits Can you show that your suppliers have had at least one social compliance audit in the past year? Was a third-party laboratory and/or industry standard used (e.g., Sedex)?

• Compliance Your customers will expect that you have the complex and confusing world of compliance regulation all figured out.

o Regulation Do you have statements on your website that summarize your company’s approach to the Consumer Product Safety Improvement Act (CPSIA) and Prop 65? Can you tell your customers the testing that is necessary for a product type? Is your staff trained on Undue Influence and Recall Management?

o Documentation Can you provide General Conformity Certificates (GCCs) and Children’s Product Certificates (CPCs) upon request? Can you show that a product was properly evaluated, tested and inspected before shipping to your customer?

The steps above are just a start, but having this information ready will make your next questionnaire request much easier and more impressive. Of course, nothing beats having a well-developed compliance program with processes you use every day. These questionnaires can actually be a good thing as they can lead companies down the road to creating an effective program to ensure all of their products are safe and compliant.

These types of documents are all part of the larger push for transparency in our industry. For decades we’ve kept our supply chain secret but this practice is largely incompatible for larger customers. The questionnaire is the first step to have more transparency in the process, but it’s going to go deeper as time goes on. Expect more audits, more documents and more expectations from your clients.

On a positive note, receiving a compliance questionnaire is an achievement—it means you’ve made the initial cut of vendors and your customer wants to learn more about you. It also means there is an opportunity to do a better job than your competitors. Their loss will be your gain.

Josh Kasteler is a compliance consultant with PromoCompliance. He can be reached at josh@promocompliance.com.

Compliance Tip

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PPAI’s Promotional Products TurboTestTM provides a product safety road map, asking users simple, yes-or-no questions about a particular product or product line and then breaking down the relevant product safety regulations into easy-to-understand, easy-to-implement steps. It’s fast, easy-to-use and free to PPAI members. Take a look. Find it under Inside PPAI/Product Responsibility at www.ppai.org.