| ALIGNMENT IN PRODUCT SAFETY AND THE SUPPLY CHAIN |
| Author: Ik-Whan Kwon, Ph.D, Seock-Jin Hong, Ph.D, Donald Kornblet |
As governmental agencies push ahead in aligning processes and priorities with one another, giving concrete definition to the concept of globalization in product safety, industry is striving to do its own internal alignment. In attempting to align supply chain management and concepts, companies are in the midst of organizational redefinitions as significant as the introduction of time and motion studies in the 1950s.
The signs of governmental alignment are more public than the individual evolution within companies around the alignment of product safety and the supply chain. Regulators from different countries are meeting regularly, sharing information, issuing joint press releases, and even trading personnel for short term internships with one another. Among the initiatives at the CPSC:
• At the Organization for Economic Co-operation and Development (OECD), work is now going on in the area of risk analysis, global recalls portal (globalrecall. oecd.org), and the beginnings of a global injury data portal as drawn up in an initial work plan;
• A Pilot Alignment Initiative program is being tested by working with other countries, through the International Consumer Product Caucus, to create annual forecasting of issues and areas of unaddressed hazards; • Joint news release announcements on product safety and recall matters are increasingly common, as illustrated by a Poison Awareness campaign launched by Mexico, Canada, and U.S., and joint product recall announcements within North America.
• Summit Meetings are regularly scheduled to discuss/align on product safety requirements, technical regulations, standards, market requirements in regulated and voluntary areas. Import surveillance approaches and issues. Such sessions include the North America Consumer Product Summit, the United States and China summit, and the U.S./European/China summit.
• Exchange programs that put agency personnel from one country into another, including having personnel from Australia, Canada, Vietnam, and Brazil assigned to internships at the CPSC, and having CPSC personnel on short term assignments with Canadian regulators.
When we began an examination of how companies are progressing in the alignment of supply chain and product safety processes, the outline of progress is less defined, though clearly efforts are underway with the vast majority of companies that rely on outsourcing and an international supply chain as a business strategy.
As outlined in a research paper published in the IEEE Magazine (2013), the authors note the increasing complexity of supply chain operations as globalization increases, crossing national boundaries and encompassing countless regulations, compliance issues, and cultural barriers. When products face questions of compliance or safety within a country, tracing the root cases along a complex supply chain takes time, as well as human and financial resources.
These issues are increasing at a higher velocity than ever. A 2013 study showed that among the top challenges confronted in regular supply chain forecasting and planning activities, 185 executives ranked consumer safety issues as a high-level concern (Smith & Associates, an independent distributor). Those participating in the study indicated that the issues of greatest concern, or of potential negative impact to respondents” business were: component or device recalls, consumer safety issues, government regulations/legislation, counterfeit parts, reverse logistics, E-waste, and competitive/shortened device cycles. In general, consumer safety and recalls ranked as the two most important issues across all sectors.
Professionals in supply chain management and product safety management are challenged as never before to increase their understanding of how each area impacts the other. By virtue of their wide-spread importance in the core business health, professionals need to appreciate the impact that the alignment of these two disciplines has on overall company health and brand strength.
There is still confusion in sorting out basic elements in the supply chain and product safety areas. This begins with the basic premise that products that meet all government requirements may still be deemed “unsafe” in the marketplace due to identifying unreasonable risks to consumers based on usage and changing characteristics of the product over time.
At times the objectives of supply chain and product safety may appear to be at odds. Here are examples of this misalignment in examining the basic elements of supply chain:
• A primary goal of supply chain operations is cost optimization for all supply chain partners, where the primary goal of product safety is to protect consumers and a company’s brand by reducing risk and minimizing the need for product recalls due to the “unreasonable risk” they may pose to consumers.
• In product design, the supply chain emphasizes efficiency and responsiveness, while product safety emphasizes safe design and risk assessment to identify any potential hazards before a product gets too far into the production process.
• In manufacturing, supply chain priorities focus on lean process, where product safety focuses on quality and conformity.
• In the area of distribution, supply chain professionals focus on value added activities and improved processes to reduce costs of distribution, while product safety professionals increasingly are required to focus on traceability and tracking the location of product that may be under investigation or recall.
• In the areas of compliance, testing, and certification, supply chain professionals may bridle at the time costs for these processes, while regulatory authorities have increasingly stringent requirements for companies to formally demonstrate and confirm that products are safe.
While these perspectives are shifting as the merging of supply chain and product safety processes continues on a global scale, there is still much integration that must be done to avoid conflict and the barriers that can arise and threaten an effective organization planning process.
Two things are clear in analyzing how to advance the integration of supply chain and product safety. First, to address this on a company level will demand senior management leadership. There is no way to integrate seemingly disparate functions within a company without the active and ongoing interest and steadfast support of management leaders. The outcome of this process will vary from company-to-company, but the results can often be surprising. One well known global company has integrated its supply chain, product safety, and sustainability programs under one department called: Supply Chain.
The second requirement needed to advance the integration of supply chain and product safety is to create a culture between supplier and OEM or customer that supports this goal. Here, again, it is clear that a company’s culture is created by the vision and actions of senior leadership, starting in the CEO’s office. As disruptions in recent years have shown, when natural or manmade crises fracture a supply chain system, it is the company’s brand that is ultimately at stake. This brand reputation is the primary responsibility, along with the financial health of a business, of the CEO and leadership team.
While government has been leading the way in responding to the alignments that arise out of a global economy, business will need to dedicate itself to aligning its internal organization to effectively respond to the global regulatory and brandsensitive environment. Companies that don’t attend to this with determination and effective planning will find themselves more often than not playing “catch up” in the arena of product safety.
Ik-Whan G. Kwon, Ph.D is Professor and Director, Center for Supply Chain Management Studies, John Cook School of Business, Saint Louis University. [email protected]
Dr. Hong is a professor at the Kedge Business School in the Bordeaux Management School, France. [email protected] Donald R. Kornblet is Product Safety Advisor to the Center for Supply Chain Management Studies, John Cook School of Business, Saint Louis University. [email protected]
Donald R. Kornblet is Product Safety Advisor to the Center for Supply Chain Management Studies, John Cook School of Business, Saint Louis University. [email protected] |
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