White Paper

Navigating the World of Tougher Product Safety

and Compliance Requirements

Navigating the World of Tougher Product Safety and Compliance Requirements

Table of Contents
Sourcing Shifts...................................................................................................................3
Changes to Regulatory Compliance.................................................................................4
International Regulations..............................................................................................4
U.S. Federal and State Consumer Product Safety Laws................................................4
Product Safety and Compliance in Todays Global Environment......................................5
Improving Product Safety and Compliance with Technology...........................................6
Product Design and Development................................................................................6
Production Operations..................................................................................................7
Post Production.............................................................................................................7
Key Steps for Maximizing Product Safety and Compliance..............................................7

Navigating the World of Tougher Product Safety and Compliance Requirements

Global organizations are operating their supply chains in an environment of increasing

complexity and ever-changing regulatory constraints. The product safety and
compliance risks involved are persistent and costly. Most companies realize that
supply chain excellence in the areas of product safety and compliance is a journey
with many obstacles to address and overcome. In order to properly navigate the
product safety and quality requirements for your supply stream, you need to utilize
technology tools and best practices that create an efficient program for all parties
involved.
This paper reviews how global sourcing shifts influence product safety and
compliance, the growing regulatory pressures from nearly every level of government,
and provides approaches to help manage the increasing regulatory requirements and
streamline product safety and compliance initiatives.

As the sourcing
landscape changes,
more companies
are chasing the last
penny by trying to
find new partners or
countries to which
to move production.

Sourcing Shifts
Global companies have traversed the globe in search of the prime source for low
manufacturing costs while maintaining product quality. Outsourcing began in the
1960s when many U.S. companies moved production to Mexico. When China opened
its doors to international trade a few decades ago, many countries saw their local
manufacturing output drop significantly as China became the largest exporter in the
world with more than 35% of the market share in apparel alone. Over time, China
has built the infrastructure to fully support this monumental manufacturing effort and
remain a global manufacturing leader because of low production costs and clear
access to raw materials.
While China remains a manufacturing powerhouse, there are signs that an inevitable
decline is taking place. As Chinas emerging middle class has caused a retail boom
and the growth of consumer outlets in its own country, factory capacity for outsourced
production has declined, raw material costs have increased and wages are on the rise.
All of these factors result in companies reconsidering their current supply base and
identifying any needs for additional supplier diversification, but this isnt as easy as
it seems.
As the sourcing landscape changes, more companies are chasing the last penny
by trying to find new partners or countries to which to move production. But the
problem is that all the new countries already have been found, and U.S. companies
are struggling with global labor-force changes and raw-material price volatility. Some
now wonder whether the answer is to avoid the problems of international sourcing
altogether and move production back (or at least closer) to the United States.i
The geographic shifts to new countries arent just a cost issue; they affect product
safety and compliance. As an example, compared to many other countries, factories
in China have extensive experience in getting new production sites operational
and compliant, relatively quickly. Although, previous experience and product safety
knowledge doesnt mean these factories get it right every time. Even for experienced
operators, it can be difficult to fully meet product safety and compliance requirements
due to the fluidity of these regulations. The need for geographic diversification simply
adds one more level of complexity as new factories and vendors need to be fully
trained on all of the regulations to meet the requirements.
i

Srikanth, et al. 2011.

Navigating the World of Tougher Product Safety and Compliance Requirements

Changes to Regulatory Compliance

Managing global trade regulations is complex, especially when a number of countries are involved in the sourcing,
production and distribution operations. With each new country of origin and destination added to an organizations
portfolio, a slew of new regulations and compliance requirements must be met (e.g., Restricted Substance List, itemspecific trade data, Customs-Trade Partnership Against Terrorism [C-TPAT]). Compliance program inefficiencies lead
to shipment delays or possible retention of items at Customs, resulting in extra time and cost considerations.

International Regulations
Global organizations are taking advantage of the evolving economies around the globe and beginning to sell more
in growing international markets. This expansion means additional issues to address regarding the matters of product
safety and compliance. As companies expand the number of countries they operate within, they have to be fully
cognizant of the country specific laws and regulations. For example, consumer protection issues now occupy the
forefront of thinking in many areas of the apparel world.
One such example is the comprehensive REACH (Registration, Evaluation and Authorization of Chemicals) program
the European Union initiated in 2012. The regulations are key to ensuring that European consumers have confidence
that the products they are buying are safe. It is a system which allows EU Member State market surveillance authorities
and the European Commission to share information about dangerous products found on the European market quickly
and efficiently and to inform consumers about potential risks to their health and safety.ii Participating companies
and consumers utilize the Rapid Alert System for dangerous non-food products (RAPEX), the EUs alert system that
facilitates the rapid exchange of information between Member States and the Commission on measures taken to
prevent or restrict the marketing or use of products posing a serious risk to the health and safety of consumers with
the exception of food, pharmaceutical and medical devices, which are covered by other mechanisms. In 2011 alone,
RAPEX handled 423 notifications from consumers about apparel, textile and fashion products accounting for 27% of
the total notifications logged.
Canada serves as another example where their Consumer Product Safety Act was introduced in 2009 and increased
the capabilities of Heath Canada in several aspects, including the ability to:

Order recall and other corrective measures

Require record-keeping to allow traceability in the event of a recall
Require mandatory reporting by industry of incidents related to their products
Require tests and studies to verify compliance or prevent non-compliance
Share/disclose information to international governments
Levy increased fines and penalties
This legislation raises the bar for apparel companies, especially those that operate in sensitive product areas such as
childrens wear. Recent product recalls in Canada and the United States have provided an incentive for governments to
focus on childrens products. This special scrutiny extends to toys, jewelry, and apparel. As a result, there is going to be
a higher regulatory threshold, going forward, for companies that import or produce childrens products for sale in the
North American marketplace.iii

U.S. Federal and State Consumer Product Safety Laws

Since the 2008 enactment of the Consumer Product Safety Improvement Act (CPSIA), manufacturers, distributors,
importers, and retailers have noticed more aggressive enforcement of Consumer Product Safety Commission (CPSC)
regulations. In 2011-2012, for example, companies faced intensified scrutiny and increased penalties for allegedly
ii
iii

European Commission 2012.

Canadian Apparel Federation 2012.

Navigating the World of Tougher Product Safety and Compliance Requirements

failing to timely report product defects under this act. Now, more than ever, global organizations need to understand
the law and develop strong CPSC compliance programs.
In addition, some individual states maintain their own product safety regulations. Many of these regulations are more
stringent than the standards set at the federal level, adding to the complexity of product safety rules and regulations.
Following are three examples of localized product and safety legal enactments:

Washington State Childrens Safe Products Act: The Washington Childrens Safe Product Act requires that the
Department of Ecology evaluate and prioritize chemicals for which companies will have to report the presence in
their products. The reporting rule for this legislation was finalized in July 2011. Reporting dates are dependent on
the type of product and the size of the company.

California Prop 65: Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986, was enacted as a
ballot initiative in November 1986. Proposition 65 is a California law that requires warning labels on ALL products
(not just childrens products) sold in California that contain lead, phthalates, cadmium and any one of 850 other
chemicals that the State of California believes could cause cancer or reproductive toxicity. Prop 65 allows so-called
citizen enforcers to enforce the law. Non- Government Organizations, other groups and even private Californian
citizens can sue in California courts and collect part of the fines.

California Green Chemistry: AB 1789 requires that California agencies evaluate and prioritize chemicals which
should be removed from consumer products in California. The intent of the law is to require companies with
chemicals that have been identified, to evaluate potential alternatives to the chemicals in question and then replace
them in their supply chain. These alternative assessments and the surrounding regulations are often referred to
collectively as green chemistry.
To assist with this daunting task, the American Apparel & Footwear Association (AAFA) has published and maintains a
Restricted Substance List (RSL). The list covers chemicals and other substances whose presence in a product is restricted
through a government regulation or law. The list identifies the most restrictive iteration of that regulation worldwide.iv

Product Safety and Compliance in Todays Global Environment

In a recent Supply Chain Digest article, Editor Dan Gilmore made a statement that global supply chains are getting
more complex year-after-year. He goes on to say that our total society is no longer simplistic, so as a microcosm of
this environment it only follows suit that this complexity is compounded.
Today, global manufacturers, distributors and retailers have to make sourcing decisions in an environment where they
dont know all of the factors. Globalized sourcing operations increase the likelihood of risk or disruption at every turn.
Fierce competition and tight cost margins can further magnify the impact of a supply chain failure on a business.
Clearly product safety and compliance is a major concern and its vital to find trustworthy parties with the right
capabilities to ensure you dont expose your company to brand damage. However, this can be a difficult task when
many parts of the supply network are outsourced to different parties yet you are responsible for the actions of all
involved. Through a robust supplier risk management program that incorporates a holistic approach to sourcing and
production, you can guarantee quality and compliance as an excellent strategy to mitigate risk against costly fines,
product recalls or lost market share.

Now, more than ever, global organizations need

to understand the law and develop strong CPSC
compliance programs.
iv

American Apparel & Footwear Association, Restricted Substance List, 2012.

Navigating the World of Tougher Product Safety and Compliance Requirements

Improving Product Safety and Compliance with Technology

The combination of obstacles and concerns has made compliance more critical for global operations. A coordinated
supply chain solution that connects all levels of the trading partner community, with product data and order
information in a unified application, can help you achieve better results. A holistic manufacturing and supply chain
approach can provide a number of direct benefits that include:

The ability to take preventative measures through improved visibility and reporting.
Anticipate and respond promptly to issues by managing risks that can be controlled.
A focus on uncertainties rather than certainties; in other words point you to the problems that need attention
when a reactive measure is necessary.
Furthermore, product safety and compliance functions arent just between compliance teams and factories. Every key
group in your supply chain, internal and external, is a stakeholder in this area. Analysts clearly state that to differentiate
in todays global business environment, companies need to develop and manufacture anywhere in the world if they
expect to win in the marketplace.
A globally distributed supply chain brings with it greater need to control
product safety and compliance during every step in the product lifecycle. Safety,
environmental, and regulatory practices must be enforced. Lets take a closer look
at how collaboration can affect the success of your compliance initiatives.

Product Design and Development

Collaboration needs to start early in the product lifecycle as soon as designers
sketch out the line or engineers develop the initial product concept. To support the
business needs for the design anywhere, manufacture anywhere, sell everywhere
concept, organizations need to implement a solution for bill of materials (BOM)
management and traceability in order to stay aligned with compliance rules. This
provides globally dispersed manufacturing organizations access to bill of materials
and other information related to product development activities, and facilitates realtime collaboration across the distributed teams. This level of cross-functional BOM
management facilitates global compliance before, during and after production.

Compliance program
inefficiencies lead to
shipment delays or
possible retention
of items at Customs,
resulting in extra
time and cost
considerations.

By utilizing collaborative product development capabilities during the product and

technical design processes, companies can reduce the risk of blocked sales, the
need for product redesigns and other costs. Designers will only select raw materials
and components that meet the standards and maintain brand image. Before
adopting these components into the tech pack, testing can be conducted and this
information can be stored for future reference.
This level of visibility and control ensures product development, procurement
and production is in-line with compliance and provides a preventative means of
managing compliance risk. An April 2015 Aberdeen Group report, Strategic Sourcing
and Segmentation: Prescriptive Control Tower Approach, supports this concept
by identifying Best-in-Class companies are 1.7 times as likely to use prescriptive
segmentation and optimization supply risk management. This helps to ensure what
is produced meets international regulatory testing and trade requirements, brand
specifications, and social compliance standards with comprehensive functionality
to manage component and product testing, auditing, and finished goods quality
inspections.
6

Navigating the World of Tougher Product Safety and Compliance Requirements

Production Operations
Item quality and safety, in addition to supplier social responsibility standards and regulatory practices, must be
enforced to protect brand integrity and reduce the risk of costly product recalls. This applies equally across all phases
of the product lifecycle. Collaboration with external suppliers is required to maintain ethical and regulatory standards.
During the production, packaging and shipment processes, finished goods can deviate from in compliance
components to a non-compliant item. Examples might include packaging of a childrens item that is not within
government standards to avoid suffocation risk or the addition of embellishments that were not considered during
the design process but contain unsafe material composition.
To proactively manage quality and safety, companies should fully monitor and manage product and component
inspections with third-party inspection companies or internal teams. Online inspection forms can be utilized for
these requests, providing the inspector with the detailed inspection requirements. When complete, these forms
can be printed and shared electronically for the tracking of production quality and compliance results. This level
of collaboration enforces consistent standards and gives the companies the ability to lock-down activity with noncompliant suppliers. Key performance indicator scorecards, based on supplier performance and product quality,
provides an effective solution to spot any trends that need to be addressed. These are all examples of proactive
measures that allow for corrective action in the future, resulting in lower costs and risks.

Post Production
What happens when your product is recalled or held up at the port? You need to have the ability to trace every order
back to the supplier (and the suppliers supplier in most cases). In these situations, we are talking about tracing where
the product was manufactured, what materials went into the finished good, and where these materials are used in
current or completed orders. This level of visibility and control means companies can react to problems quickly with
the data necessary to respond cost effectively.
With supplier collaboration and reporting capabilities, supply chain managers can visualize their primary supply and
feeder streams. Based on the data unified from product, factory and raw material orders, companies can achieve
comprehensive traceability. Compliance managers can identify areas where compliance risk is most prevalent based on
historical data where has the supply chain failed and alter the course to alleviate future failures.
More importantly, when a recall or safety issues occur, you are able to trace it to the origination point. Action can then
be taken to minimize the current breakdown and verify which products have been affected.

Key Steps for Maximizing Product Safety and Compliance

To reach this level of all-encompassing product safety and compliance, integration between the technology
solutions you already utilize is crucial. This means implementing both technology and best practice process changes.
Here are some recommended steps global organizations should consider:

Be well informed about all federal, state and international Product Safety laws such as the United States CPSIA,
Californias Prop 65 and other state laws, AAFAs RSL and Europes REACH programs.

Improve product quality by testing raw materials and components early in the product lifecycle, in addition to
first-run samples.

Create a material library of approved items for your tech design team and suppliers to select from, protecting
your company against use of non-compliant items.

Test finished goods as another level of protection.

Utilize a web-based portal to collaborate with suppliers, vendors and compliance teams and fully share test results.
Associate testing results with product and raw material records. Then link these with each supplier, purchase order
and shipment record for traceability.
7

Navigating the World of Tougher Product Safety and Compliance Requirements

By unifying PDM, PLM, and supply chain management tasks, your company and users (including internal sourcing,
quality assurance and legal teams, overseas buying offices, suppliers, agents, external inspectors, and others) gain a
better understanding of the critical interdependencies involved in product and safety compliance. The results translate
into your organizations ability to mitigate corporate risks and lower the associated costs.
To learn more about managing product and safety requirements, reducing supply chain risks and our global trade
management and supply chain solutions, contact Amber Road at Solutions@AmberRoad.com.

About Amber Road

Amber Roads (NYSE: AMBR) mission is to dramatically improve the way companies manage their international
supply chains and conduct global trade. As a leading provider of cloud-based global trade management (GTM)
solutions, we automate and optimize the supply chain functions required to import and export goods. This includes
collaborating with foreign suppliers on design and quality assurance; executing import and export compliance checks
and generating international shipping documentation; booking international carriers and tracking goods as they
move around the world; and minimizing the associated duties through preferential trade agreements and foreign
trade zones. Our solution combines enterprise-class software, trade content sourced from government agencies and
transportation providers in 145 countries, and a global supply chain network and collaboration platform connecting
our customers with their trading partners, including suppliers, freight forwarders, customs brokers and transportation
carriers. We deliver our GTM solution using a Software-as-a-Service (SaaS) model and leverage a highly flexible
technology framework to quickly and efficiently meet our customers unique requirements around the world.

Reference List
American Apparel & Footwear Association. On the Issues. https://www.wewear.org/aafa-on-the- issues/category/?CategoryId=80
(accessed May 24, 2012).
American Apparel & Footwear Association. Restricted Substance List. Vers. 10. American Apparel & Footwear Association. March 2012.
https://www.wewear.org/industry-resources/restricted-substances-list/.
Canadian Apparel Federation. Previous Legislation. 2012. http://www.apparel.ca/Product_Safety_Legislation.html. D&B Country Risk Services and
D&B Supply Management Solutions. Mitigating Supply Chain Risks. Special Report, Dun & Bradstreet Limited, 2011.
Deb, Sopan. Made in America: Trend against outsourcing brings jobs back from China. January 4, 2012. http://rockcenter.msnbc.msn.com/_
news/2012/01/14/10156162-made-in-america-trend-against-outsourcing-brings- jobs-back-from-china?lite.
European Commission. Keeping European Consumers Safe; 2011 Annual Report on the operation of the Rapid Alert
System for non-food dangerous products. Annual Report, Luxembourg: European Commission, 2012. Gilmore, Dan. First Thoughts. May 24, 2012.
http://www.scdigest.com/assets/News/12-05-24.htm#FT.
Srikanth, Sanjay, Esteban Bowles, Chris Callieri, and Deepa Neary. Stop The Roller Coaster. AT Kearney - Publications. 2011.
http://www.atkearney.com/index.php/Publications/stop-the-roller-coaster.html.

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