Supply Chain  &  Product Risk Assessment
Agenda <ul><li>Background </li></ul><ul><li>Business Impacts </li></ul><ul><li>Challenges for the SHE Professional </li></...
Overview <ul><li>In this session we will examine; </li></ul><ul><ul><li>Current background and key drivers for supply chai...
Background <ul><li>Rising costs, shareholder value, increased profitability and the need for lower overhead have driven bu...
The Effects of Globalization
US Reliance on Globalization <ul><li>In 2004 imports from developing regions, including Central and South America, Africa,...
High Profile Recalls <ul><li>CNNMoney.com - June 2007 Headlines </li></ul><ul><ul><li>Products put at risk by relentless c...
High Profile Recalls <ul><li>Product Recalls 2007 </li></ul><ul><ul><li>Mattel – over 11 million items recalled over a six...
Business Impacts Additional studies have found that shareholder returns of nearly 62% of the companies that announced disr...
In a Nut Shell? <ul><li>The real problem isn't the Chinese--it's us, or more specifically, our apparently insatiable need ...
US Consumer Safety Council <ul><li>Formed in 1972 as an independent agency of the Federal Government under the Consumer Pr...
European Union  <ul><li>The General Product Safety Directive (2001/95/EC) </li></ul><ul><ul><li>in force since January 200...
Issues Summary <ul><li>Market driven economy </li></ul><ul><ul><li>Growth and acquisition strategies </li></ul></ul><ul><l...
Exposures <ul><li>Sourcing of Component Parts </li></ul><ul><ul><li>Poor quality materials </li></ul></ul><ul><li>Sourcing...
Components/Finished Product <ul><li>Samples often do not reflect the finished product </li></ul><ul><li>Failure to provide...
Distribution <ul><li>Single source of supply </li></ul><ul><li>Inadequate due diligence </li></ul><ul><li>Lack of control ...
Counterfeiting <ul><li>Difficult to address and control </li></ul><ul><li>Country specific regulations </li></ul><ul><li>R...
Reputation <ul><li>The risks are equal for both the importer and exporter </li></ul><ul><ul><li>Cost of law suits </li></u...
Challenges for the SHE Professional <ul><li>Typical focus is internal </li></ul><ul><ul><li>Facility based </li></ul></ul>...
Solutions <ul><li>We need to adopt and implement existing processes </li></ul><ul><ul><li>No need to reinvent the wheel </...
Regulation <ul><li>Additional regulation will not prevent these situations developing </li></ul><ul><li>Regulation is ‘rea...
Existing Systems <ul><li>Management Systems Approach </li></ul><ul><ul><li>ISO 9000 – Quality Management Systems </li></ul...
Existing Systems <ul><li>Management Systems </li></ul><ul><ul><li>ISO 9000 – Creates the concept of preferred suppliers </...
Existing Systems <ul><li>In house proprietary requirements </li></ul><ul><li>Technical Product Standards </li></ul><ul><ul...
Existing Systems <ul><li>Common SHE tools can be used to identify risks in the supply chain </li></ul><ul><ul><li>GMP/HACC...
New Standards <ul><li>ISO PC 240  </li></ul><ul><ul><li>To ensure effective and timely product recalls to mitigate harm an...
Advantages for the SHE Profession <ul><li>Move away from the technical functions into the business </li></ul><ul><li>Bette...
Summary <ul><li>Our businesses are driven by cost based decisions </li></ul><ul><li>Short term gains are often off set by ...
References <ul><li>Supply Chain’s Last Straw:  A Vicious Cycle of Risk – Deloitte  http://www.deloitte.com/dtt/cda/doc/con...
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Supply Chain Safety

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In the global economy both component and finished products are sourced from a variety of countries. Without the application of appropriate due diligence procedures throughout the purchasing and distribution cycles both public safety and business liability issues can arise. This presentation will take a closer look at the systems that can be used to help mitigate such exposures.

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Supply Chain Safety

  1. 1. Supply Chain & Product Risk Assessment
  2. 2. Agenda <ul><li>Background </li></ul><ul><li>Business Impacts </li></ul><ul><li>Challenges for the SHE Professional </li></ul><ul><li>Solutions </li></ul>
  3. 3. Overview <ul><li>In this session we will examine; </li></ul><ul><ul><li>Current background and key drivers for supply chain protection </li></ul></ul><ul><ul><li>Examine business exposures throughout the sourcing and distribution process </li></ul></ul><ul><ul><li>Look at existing tools that safety professional can leverage to mitigate risks to their organizations </li></ul></ul>
  4. 4. Background <ul><li>Rising costs, shareholder value, increased profitability and the need for lower overhead have driven business to seek new opportunities </li></ul><ul><li>As a result Globalization (the removing of geographical boundaries) has enabled greater efficiencies but has created opportunities fraught with unknown risks </li></ul>
  5. 5. The Effects of Globalization
  6. 6. US Reliance on Globalization <ul><li>In 2004 imports from developing regions, including Central and South America, Africa, the Middle East, and the former Soviet States increased by 29%. </li></ul><ul><ul><li>Asia grew by 18% during this period </li></ul></ul><ul><li>In 2006 the US imported some $614 billion worth of consumer products </li></ul><ul><ul><li>$216 billion from China or 40% of all products imported into the US </li></ul></ul><ul><li>Since 1997 US trade with China has increased by 297% </li></ul>
  7. 7. High Profile Recalls <ul><li>CNNMoney.com - June 2007 Headlines </li></ul><ul><ul><li>Products put at risk by relentless cost-cutting. [ Deloitte] study finds that not one of 25 major companies (with combined revenues of $1.5 trillion) tracked was aware enough of serious risks in the product supply chain. </li></ul></ul><ul><ul><li>Lax oversight, globalization erode product safety Consumer safety advocates say not enough is being done to prevent unsafe products from reaching store shelves in the U.S. </li></ul></ul>
  8. 8. High Profile Recalls <ul><li>Product Recalls 2007 </li></ul><ul><ul><li>Mattel – over 11 million items recalled over a six week period due to lead paint/choking hazards resulting in $40MM of additional costs </li></ul></ul><ul><ul><li>Hasbro – 1 million Easy Bake Ovens due to entrapment/burns resulting in a $10.4MM in costs </li></ul></ul><ul><ul><li>RC2 Corp – Thomas the Tank Engine due to lead paint resulting in $7/8 MM in costs </li></ul></ul><ul><ul><li>Marvel – 175,000 Curious George Dolls due to lead paint </li></ul></ul><ul><ul><li>Various ‘bargain’ Toothpaste Brands – diethylene glycol as a low cost glycerin replacement </li></ul></ul><ul><ul><li>Plus over 50 additional including household electrical items, power tools, grills, candles etc. imported by major retailers </li></ul></ul>
  9. 9. Business Impacts Additional studies have found that shareholder returns of nearly 62% of the companies that announced disruptions underperformed their industry benchmarks for the three-year period beginning 12 months prior to the announcement.
  10. 10. In a Nut Shell? <ul><li>The real problem isn't the Chinese--it's us, or more specifically, our apparently insatiable need for a constant flow of lower and lower cost consumer goods. </li></ul><ul><ul><li>Ryan Mathews, Founder, CEO, Black Monk Consulting (Strategic Futuring Management Consultants) </li></ul></ul>
  11. 11. US Consumer Safety Council <ul><li>Formed in 1972 as an independent agency of the Federal Government under the Consumer Product Safety Act. </li></ul><ul><li>Prior to August 2007 did not have the required membership to mandate product recalls or take other action </li></ul><ul><ul><li>Required an amendment to the Homeland Security Act to restore temporary powers to allow it to take action </li></ul></ul><ul><ul><li>As of March 2008 very little action has been taken to effect changes in regulation or agency resources </li></ul></ul>
  12. 12. European Union <ul><li>The General Product Safety Directive (2001/95/EC) </li></ul><ul><ul><li>in force since January 2004 </li></ul></ul><ul><li>For consumer products not regulated by specific legislation (toys, electrical products, machinery, foodstuffs, cosmetics etc) </li></ul><ul><ul><li>Product safety requirements </li></ul></ul><ul><ul><li>CE marking process </li></ul></ul><ul><li>Rapid Alert System for non-food consumer products (RAPEX) </li></ul><ul><ul><li>In force since 2005 </li></ul></ul><ul><ul><li>Restricts the marketing or use of products posing a serious risk to the health and safety of consumers </li></ul></ul>
  13. 13. Issues Summary <ul><li>Market driven economy </li></ul><ul><ul><li>Growth and acquisition strategies </li></ul></ul><ul><li>Cost driven decisions </li></ul><ul><li>Products bought ‘sight unseen’ </li></ul><ul><li>Very little control over manufacturers </li></ul><ul><li>Partnership approaches not developed </li></ul><ul><li>Inability of regulators to maintain oversight </li></ul>The Risks
  14. 14. Exposures <ul><li>Sourcing of Component Parts </li></ul><ul><ul><li>Poor quality materials </li></ul></ul><ul><li>Sourcing of Finished Products </li></ul><ul><ul><li>‘ Sight unseen’ </li></ul></ul><ul><li>Disruption of the Distribution Process </li></ul><ul><ul><li>Logistics </li></ul></ul><ul><ul><li>Product alteration </li></ul></ul><ul><li>Counterfeiting </li></ul><ul><ul><li>Substitution of sub standard materials </li></ul></ul><ul><li>Reputation </li></ul>
  15. 15. Components/Finished Product <ul><li>Samples often do not reflect the finished product </li></ul><ul><li>Failure to provide adequate specifications </li></ul><ul><li>Lack of quality assurance processes at manufacturers sites </li></ul><ul><li>Lack of testing and inspection at point of entry </li></ul><ul><li>Bulk market entry </li></ul><ul><li>Speed to market requirements create time barriers to country of use pre market conformance testing (ANSI, UL, ASTM) </li></ul>
  16. 16. Distribution <ul><li>Single source of supply </li></ul><ul><li>Inadequate due diligence </li></ul><ul><li>Lack of control and verification throughout the delivery process </li></ul><ul><li>Reliance on unmonitored third party service providers </li></ul><ul><li>Lack of adequate insurance to cover losses </li></ul>
  17. 17. Counterfeiting <ul><li>Difficult to address and control </li></ul><ul><li>Country specific regulations </li></ul><ul><li>Reputation damage can be extensive </li></ul><ul><li>Need to develop in house monitoring and reaction processes with local law enforcement and often private investigation agencies </li></ul>
  18. 18. Reputation <ul><li>The risks are equal for both the importer and exporter </li></ul><ul><ul><li>Cost of law suits </li></ul></ul><ul><ul><li>Damage to reputation with both customers and within the industry </li></ul></ul><ul><ul><li>Lack of repeat business </li></ul></ul>
  19. 19. Challenges for the SHE Professional <ul><li>Typical focus is internal </li></ul><ul><ul><li>Facility based </li></ul></ul><ul><ul><li>Lack of understanding of the true business risks </li></ul></ul><ul><li>Business Integration has not been a strong point </li></ul><ul><ul><li>Regulatory not financial </li></ul></ul><ul><ul><li>People not product </li></ul></ul><ul><ul><li>Lack of credibility </li></ul></ul>
  20. 20. Solutions <ul><li>We need to adopt and implement existing processes </li></ul><ul><ul><li>No need to reinvent the wheel </li></ul></ul><ul><li>As safety professionals we need to become more active in the supply chain process </li></ul><ul><ul><li>Utilize existing technical and risk management skill sets </li></ul></ul><ul><li>Business alignment becomes critical to our success </li></ul><ul><ul><li>Safety professionals need to better integrate into the business, this gives us an opportunity to demonstrate value </li></ul></ul>
  21. 21. Regulation <ul><li>Additional regulation will not prevent these situations developing </li></ul><ul><li>Regulation is ‘reactive’ and is not comprehensive </li></ul><ul><ul><li>USPSC and FDA do not have pre market testing jurisdiction </li></ul></ul><ul><li>Developing uniform regulations across all geographies is not practical and takes inordinate time </li></ul><ul><ul><li>e.g. Globally Harmonized of Classification and labeling of Chemicals official mandate was in 1992! </li></ul></ul>
  22. 22. Existing Systems <ul><li>Management Systems Approach </li></ul><ul><ul><li>ISO 9000 – Quality Management Systems </li></ul></ul><ul><ul><li>ISO 14000 – Environmental Management Systems </li></ul></ul><ul><ul><li>OHSAS 18000 – Health & Safety Management Systems </li></ul></ul><ul><ul><li>SA 8000 - Social Accountability Standard </li></ul></ul><ul><li>All processes can be applied generically across ALL industries and products </li></ul>
  23. 23. Existing Systems <ul><li>Management Systems </li></ul><ul><ul><li>ISO 9000 – Creates the concept of preferred suppliers </li></ul></ul><ul><ul><li>All standards create measurable performance criteria </li></ul></ul><ul><ul><li>ISO 14000/OHSAS 18000 - Utilize concepts of risk assessment for establishing controls </li></ul></ul><ul><ul><li>All standards are auditable </li></ul></ul><ul><ul><li>All standards are third party verifiable </li></ul></ul>
  24. 24. Existing Systems <ul><li>In house proprietary requirements </li></ul><ul><li>Technical Product Standards </li></ul><ul><ul><li>ISO - global </li></ul></ul><ul><ul><li>IEEE - global </li></ul></ul><ul><ul><li>EN – Europe </li></ul></ul><ul><ul><li>ASTM/ANSI – US </li></ul></ul><ul><li>In the absence of proprietary standards these standards can be adapted to the needs of the business </li></ul><ul><li>Use of standards provides a baseline for auditing of compliance </li></ul><ul><li>Allows for the development of corrective actions against recognized criteria </li></ul>
  25. 25. Existing Systems <ul><li>Common SHE tools can be used to identify risks in the supply chain </li></ul><ul><ul><li>GMP/HACCP </li></ul></ul><ul><ul><li>FMEA </li></ul></ul><ul><ul><li>Six Sigma statistical analysis </li></ul></ul>
  26. 26. New Standards <ul><li>ISO PC 240 </li></ul><ul><ul><li>To ensure effective and timely product recalls to mitigate harm and public exposure </li></ul></ul><ul><ul><li>Will apply to consumer products, including electrical and gas household appliances. The projected standard will be useful for manufacturers, retailers, importers, testing organizations, providers of third party recall services, legal firms, government regulators and consumers/safety organizations. </li></ul></ul><ul><ul><li>The secretariat of the project committee has been assigned to the ISO member body, DSM, Department of Standards Malaysia. </li></ul></ul>
  27. 27. Advantages for the SHE Profession <ul><li>Move away from the technical functions into the business </li></ul><ul><li>Better understand the issues that the business face in competitive markets </li></ul><ul><li>Partner with both internal and external customers </li></ul><ul><li>Utilize existing skill sets and knowledge </li></ul>
  28. 28. Summary <ul><li>Our businesses are driven by cost based decisions </li></ul><ul><li>Short term gains are often off set by long terms consequences </li></ul><ul><li>Establish key operational partnerships within your organization </li></ul><ul><li>Create partnerships (get to know!) with your vendors </li></ul><ul><li>No need to reinvent the wheel, the tools exist </li></ul><ul><li>Educate your customers as to the possible risks of their business decisions </li></ul><ul><li>Do not rely on regulation to drive business accountability </li></ul>
  29. 29. References <ul><li>Supply Chain’s Last Straw: A Vicious Cycle of Risk – Deloitte http://www.deloitte.com/dtt/cda/doc/content/us_consulting_suppchain_wp_090107.pdf </li></ul><ul><li>US Consumer Safety Council http://www.cpsc.gov/BUSINFO/intl/index.html </li></ul><ul><li>A Comparison of U.S. and E.U. Product Safety Regulations: A Case Study – Bryan Harris http://www.piercelaw.edu/risk/vol8/summer/harris.htm </li></ul><ul><li>PRODUCT SAFETY IN EUROPE: A Guide to corrective action including recalls http://www.berr.gov.uk/files/file23025.pdf </li></ul>

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