February 13, 2017
Manufacturers, attempting to move at the speed of change, run the risk of becoming careless about regulations and mandates. As they rush to market with new concepts, innovative products, and new systems to make it all happen, they may not pause long enough to check and double-check regulation compliance.
In the frenzy, it is easy for details to slide. First, shortcuts in quality find their way onto the shop floor. Then, industry requirements are glossed over. Then traceability becomes muddy. Then, at the far end of the spectrum, a blind eye is turned to sloppy reporting on federal compliance mandates.
It’s understandable, but highly risky. Such errors can destroy a company. Not just in fines and legal action, but in loss of brand credibility and consumer confidence.
Global manufacturers today face thousands of mandates concerning consumer safety, national security, environmental protection, employee rights, financial accountability, international trade agreements, and protection of patents and intellectual property. That’s just a few of the top issues, and ones related to the US. Every country has its own tax and trade regulations to impose on global enterprises and trade partners. Then, individual industries, such as the medical device industry, have additional compliance mandates.
Managing risk and compliance is no easy task, especially when the organizational structure is stretched thin. As products, partnerships, and supply chains become more complex and multi-tiered, the regulation issues also become more complex. Repercussions, too, become greater. Manufacturers need to proceed with caution. As today’s optimistic manufacturers invest in digital and disruptive technologies, they should also invest in tools to help them track, control, comply and report on the various legal mandates they face.
Let software help. Here are some tips.
Accept responsibility. Assign a C-level officer to own risk management. Manufacturers must fully understand the landscape in which they operate. This means the local as well as the national and international environment. Ignorance of the law is never an acceptable defense. You must understand and abide by the applicable laws. Small companies with fewer resources may find mastering the tangle of overseeing agencies to be a major challenge. Mandates full of industry jargon, legalese, and government-speak can read like a foreign language to the novice.
Assign stewards. Manufacturers can protect themselves from potential landmines by conducting thorough research. With the power of modern search engines, few topics are out of reach of a determined researcher. Dedicating time and resources to this precursor can be the biggest challenge as product designers often want to rush to market with time-sensitive innovations. Rushing to production without thorough research on legal parameters, though, can be disastrous.
Assess risk. Risk is inevitable. The question is what level of risk is tolerable to the stakeholders? This evaluation cannot be a one and done. It requires a system that will continually monitor conditions and spot likelihood of noncompliance or “incidents” falling outside of prescribed parameters. An at-risk incident can be can be as singular as a late delivery to one customer or as far reaching as contaminated waste water spilling into the environment.
Apply sensor technology. Continuous monitoring of the production process—at multiple stages in the manufacturing and assembly process—can spot variations to specifications, such as dimensions, density, or weight. Sensors today can monitor such conditions to incredibly minute deviations, helping eliminate defective products that could result in a class-action suit costing you millions of dollars.
Seek experts. Get advice. Risk incidents can jeopardize the brand, credibility, or confidence of investors. Risks can also endanger people or places. Some of these issues are hard to define or quantify and, therefore, difficult to assign algorithms and use numerical metrics to signal unacceptable risk levels. Even “soft” assets, such as brand integrity, need to be protected. Turn to experts to help project ramifications to the company’s cash flow health, bottom line profitability, and impact on sales, if your stakeholders make decisions primarily on fiscal results.
Build in safeguards. In some industries—such a flight, medicine, and security—failure is simply not an option—no matter the financial details. When stakes are high, multiple layers of safeguards are often the best form of defense. Systems of checks and balances and independent cross-checks provide added confidence. Here, too, software solutions, smart sensors, and robotic engineering can add a digital guarantee of objectivity and precision.
Protect your assets. Legal responsibility is far reaching in today’s highly litigious society. Civil lawsuits tend to name as many companies as possible—no matter how remotely connected to the primary incident. An injured customer may name the manufacturer, the distributor, truck driver, retail store, and the clerk who put the disputed item on the store shelf. Although illogical correlations can be thrown out in court, legal hassles—and fees—can be extensive. How can you protect yourself from being caught in a wide net? Your best protection is to know your supply chain partners well. Choosing to work with highly reliable companies that share your perspectives on product quality, service to the customer, and community responsibility is an important first step.
Partner with care. As the “barriers to entry” seem to diminish, more start-ups, angel-backed entrepreneurs, and crowd-sourced partnerships dot the trade landscape. While these innovative companies often bring a fresh perspective, they can also complicate trade. It is harder to know the integrity of every new start-up. “Newness” doesn’t always mean unreliable, but it does bring uncertainty and risk to the supply chain.
Insist on visibility. Supply chain visibility is an important feature that modern ERP solutions and supply chain management solutions (SCM) can provide for manufacturers. Today’s advanced SCM solutions help manage the relationships, tracking location of deliveries, and identifying trends.
Traceability matters. When working with supplier partners, traceability is always important for manufacturers that may face recalls or need to track parts and components. This is another area where software tools are extremely valuable. Traceability down to the part level or ingredient level is a challenge if you are relying on spreadsheets or manual systems. Recalls can be devastating to the bottom line and the brand. Often, speed of response helps lessen the blow. You need to be able to quickly determine which units and customer orders contain the recalled components.
Track facts. Tracking components is also important in certain industries, such as aerospace and defense, when the manufacturer must track flight hours or service history. Again, software makes this complex task easier. Advanced solutions track parts, versions, warranties, and service regulations or mandates, such as maximum flight hours.
Protect intellectual property. As collaboration and manufacturing partnerships between fabricators and specialized vendors increase, clear ownership of ideas can become blurred. Collaboration poses risks that must be weighed against the benefits. Product lifecycle management (PLM) solutions help manage the innovation process, tracking design principles as they are proposed, providing a reliable trail of development. Integrated social tools also help track communication with partners, protecting the history of shared projects in case there is later dispute.
Define rights. Ownership occasionally becomes an issue in online portals that invite customers to design their own personalized variations of a product. Does the customer own the design? Or, does the manufacturer retain rights? These gray areas can cause confusion and conflict, unless the solution makes terms clear and helps to manage the process. When using well established product configuration tools, you can be certain that such issues have been addressed and your interests are protected.
Define data rights. Ownership of data generated from Internet of Things technologies is another issue. When a smart car generates data about driving habits and the car’s performance, that data provides insights of value to numerous parties, from tire dealers to gas stations and insurance companies. Some early legal cases have sided with car owners, saying the data generated from the car belongs to the car owner, not the car manufacturer. This area of rights and ownership is likely to see evolving legal positions. No matter how the law defines the issue, software solutions will play a key role in the management of data and protecting the chain of ownership.
As disruptive technologies evolve in manufacturing, other ownership, liability, risk, and compliance issues are likely to arise. No one can predict all of the unfolding nuances of law and risk assessment, but we can predict that software solutions will play a valuable role in managing, tracking, and understanding the data-rich details. As manufacturers speed to the next generation of technology, they need to remember to pause, take a breath, and check the details.