Ensure Your Products Have a Compliant Manufacturing Supply Chain
Regulators and customers expect safe, traceable, and environmentally friendly products and ingredients.
- Businesses run the risk of incurring major penalties when they do not know compliance requirements.
- IT must step up to ensure the business understands what’s needed for compliance.
- Collaboration between IT and the business is vital to ensure compliance without overspending.
- IT must align its perceptions of IT process importance with that of the business and foster effective communication methods that enable a technology driven approach.
Our Advice
Critical Insight
- Gain real insight into the regulatory standards and certifications necessary for the business.
- Understand the potential cost and impact of noncompliance and determine which tools should be investigated for strategic improvement initiatives.
- Transform your compliance business process to future-proof your compliance activities and turn compliance into a competitive advantage.
Impact and Result
- Identify: Understand the compliance, certifications, standards, and regulatory activities that are important for your business sector and products.
- Prioritize: Further determine which tools can be used for tracking and tracing information for conducting internal audits and generating reports for governing bodies.
- Align: After establishing what technologies are needed for compliance, form the team in accordance with initial setup and ongoing management of compliance across all suppliers as well as considerations for management of in-transit control processes such as customs and CTPAT.
Ensure Your Products Have a Compliant Manufacturing Supply Chain
Regulators and customers expect safe, traceable, and environmentally friendly products and ingredients.
Analyst perspective
Modern products, processes, and supply chains have become increasingly complex as the world has expanded production to farther points across the planet.
Whether the raw materials or ingredients for products are produced onshore or offshore, consumers and governing authorities expect that companies are producing safe products:
- All raw materials must be sourced from reputable suppliers.
- Materials and ingredients must be safe for their intended interactions, whether that be touch or consumption.
- Certifications such as safe product and certificates of origin must be obtained from reputable certification authorities, which requires extensive due diligence for selection, implementation, and upkeep.
- Companies must know the codes, standards, regulations, and certifications necessary for their industry.
- Companies must keep up to date on both local and global regulations.
The modern CIO must take responsibility for providing the lens for the business to see the right tools and technologies that enable holistic tracking and tracing of products across the entire supply chain.
“Is your business and IT ISO certified?
If not – why is best practice not good enough for you? ”
– Jeffrey Hunt,
CEO, SHEA Global
Kevin Tucker
Principal Research Director
Manufacturing, Supply Chain & Logistics
Info-Tech Research Group
Executive summary
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Challenge: Compliance Needed
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Complication: Risks
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Solution: Tools & Processes Use this research to assess your business and raise compliance awareness:
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Info-Tech Insight
Compliance requirements evolve to keep up with the changing state of business. Companies need to stay up to date on the regulations governing their industry and the tools at their disposal.
Durable versus non-durable goods
Non-durable goods typically last three years or less
Non-durable goods wear out quickly: These products are either single-use items or items that wear out quickly and have no further value. These are products that consumers are likely to buy and replace often.
- Examples include candies, packaged foods, cosmetics, beverages, medications, office supplies, tobacco, clothing, footwear, light bulbs, detergent, and cleaning products. Industry segments in manufacturing are Food & Beverage, Chemicals, Pharmaceuticals, Apparel, Textiles, Footwear, Petroleum, and Paper Products.
Durable goods last a long time: These products hold up under extended use, which is typically defined as greater than three years and could be almost infinite.
- Examples include auto parts, appliances, tools, jewelry, bicycles, motor vehicles, and furniture. Industry segments include Automotive, Aerospace, and Consumer Durables such as Major and Minor Home Appliances.
Four dimensions of compliance
These are the basis of compliance for consumer packaged goods safety
CODES are generally accepted rules: These are a set of rules the business/organization considers normal approaches to conduct for the business. A code of conduct may be used to outline accepted behaviors for the business.
STANDARDS are measures that leverage the codes: They are the methods that outline how to effectively execute upon the codes that are defined within the business.
REGULATIONS are governed by law: They are defined by government bodies, and compliance is required by law. Regulations are made up of codes and standards.
SPECIFICATIONS define the product: They outline the precise dimensions and requirements for the product. For example, the USDA outlines the specific requirements for contracts that allow production and delivery of food.
Bad product leads to bad news
Avoiding product problems saves money, retains customers, and avoids litigation
Due diligence is critical for avoiding unexpected costs: When companies buy other competitive companies with a goal of expanding their market share, they don’t expect that large sums of money will end up being directed toward litigation. Such is the case with Bayer when they purchased Monsanto and inherited litigation over its weedkiller, Roundup, which has ultimately cost the company more than $10 billion to settle claims from customers who reported developing cancer from the product (New York Times, 2020).
Food & Beverage outbreaks cause recalls: Misbranding, undeclared allergens, and potential contamination are the biggest causes of food recalls. In 2021 Listeria was the top bacterial pathogen causing recalls and deaths. Dole issued a massive recall of salads across all its brands due to a fatal Listeria outbreak in 2021. Dole products were previously linked to less significant Listeria outbreaks in 2015 and 2016 (Food Poisoning Bulletin).
We can’t just assume products are safe: Most of us believe the clothing we buy at stores is safe to wear. People don’t even consider that the products used to make the clothes may be toxic. In 2021 a kids’ jacket was recalled due to high levels of lead content posing a risk of lead exposure to customers. Miriam Diamond, an environmental chemist and professor at the University of Toronto, described the jacket as “evil” (CBC).
Product manufacturers bear responsibility
Product safety is the responsibility of the manufacturer
Customers need to be well prepared and companies need to be aware of their responsibilities and what’s included when claims are being submitted.
Manufacturers can be held responsible for:
- Defective or dangerous designs
- Unintentional but foreseeable manufacturing defects
- Failure to provide adequate risk warnings
- Lack of/or inadequate testing and inspection
Potential liabilities – the impact can be high:
- Punitive damages: administered by country and determined by severity
- Lost earning capacity: compensation for earnings if a person can no longer work
- Pain and suffering: compensation for a person suffering from chronic pain
- Economic loss: can be awarded in some rare cases when there was no personal injury or lost earnings
- Product recall and destruction: a requirement to recall and adjust a product or safely destroy the product to avoid any further consumer risks
Source: Injury Lawyers of Ontario
Info-Tech Insight
The manufacturer is responsible for safe ingredients and the safe formulation of said ingredients into a final product.
Product ingredients must be traceable
Regulatory tracking and traceability rules are becoming more stringent
Tracking ingredients across the production, processing, and supply chain has become a focus of the United States Food and Drug Administration (FDA) as it introduces more stringent standards to ensure safety.
Containment of an outbreak is incredibly important. In 2020 the FDA released a new blueprint that outlines how it is moving to a predictive model for reducing potential contamination of food and ensuring that the overall process is safe. The Centers for Disease Control (CDC) helps the FDA trace the origins of bacterial outbreaks.
Tracking and tracing pharmaceuticals requires planning. Manufacturers use serialization, aggregation, visual inspection, and warehouse, distribution, and patent traceability throughout the supply chain.
Volatile products require strict regulations. Chemical manufacturing has strict regulations due to the dangers of working with the ingredients and transporting the final products.
Regulators expect tracking to and from suppliers and into the finished product.
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Hazard Analysis and Critical Control Points Health and Safety Authority Global Harmonized System |
Global Food Safety Initiative Food and Drug Administration Centers for Disease Control and Prevention |
Compliance standards by industry segment
Companies must comply with the standards specific to their industry. Understand the standards and use tools to manage compliance to lower risk and develop trust with consumers.
Not intended to cover all possible certifications and standards.
Info-Tech Insight
While maintaining compliance costs time and money, noncompliance carries a far greater cost to the company and its employees.
Have a compliance management plan
Recurrence is determined by distinct certification rules that govern how certifications are granted. Larger supplier networks require more time and planning.
High-level model for implementing and governing compliance.
Info-Tech Insight
A strong team along with partner and supplier collaboration are the key to a streamlined compliance process.
Build in resilience and repeatability
Cannabis is an example of where tight production controls require more rigor
Standard operating procedures (SOPs) are an important tool for effective production in any manufacturing business, but they are absolutely vital for businesses operating in highly regulated industries.
SOPs ensure control over the production process. Cannabis is a good example of an industry that is highly regulated and where the production process is complicated by the requirement for ongoing consistency of a naturally produced product.
SOPs provide for the consistency that is expected by the customer and regulator. Using a comprehensive set of SOP documents that detail all of the tasks to perform, materials to be used, settings for light, temperature, moisture, and nutrients for feeding will lead to a consistent product with fewer defects.
Why are SOPs a must-have?
“SOPs will often be credited with making the difference between your business being profitable vs losing money due processes and product being inconsistent.”
– GrowerIQ, 2020
Info-Tech Insight
SOPs for compliance in a highly regulated industry will help to ensure all processes are repeatable and audit failures and lawsuits are avoided.
Understand product responsibilities
All countries have legislation that can result in different liabilities
Regional and global regulations are administered by different agencies.
- Some products are regulated by different regional and global branches. The local branch can be found online and leveraged for the global contact information.
- Food, Chemical, Pharmaceutical, and Non-Durable Goods are all administered under different health agencies.
The following information is typically required when submitting a claim:
- How many people have been impacted by the product and what were their injuries?
- Have they received a medical assessment?
- What treatment has been administered and what was the result?
- When was the product purchased (location, time)?
- How long did it take before signs of a problem began to occur?
- Product manufacture information: serial #, model #, batch, date(s), location of manufacture, and manufacture name.
- People affected, whether individual or group (names and ages may be withheld until a hearing in a court of law).
Info-Tech Insight
Valid emergencies can be reported to local law enforcement to expedite the process, but incident and product details are still necessary.
Product violation penalties
Once a violation is identified and reported it must be evaluated by the relevant agency
Example: Government of Canada – Health Canada
Administrative Monetary Penalties
| Classification | Gravity | History of Offenses | Penalties |
| Minor | 2 | 0 = no incidents in the past 5 years | 2 = $1,000 - $10,000 |
| Serious | 3 or 4 | 1 = one incident in the past 5 years | 3 = $2,000 - $15,000 4 = $3,500 - $20,000 |
| Very Serious | 5 | 2 = two or more incidents in the past 5 years | 5 = $5,000 - $25,000 |
Source: Health Canada
- Penalties are per person and based upon the total of all factors.
- All countries have their own criteria for assigning penalties, but this is an example of criteria used.
E-waste management is good business
Protecting the environment requires new methods and rules
Europe leads the way: In Europe, the focus, coverage range, and cost planning for improving e-waste management is superior to what is in place in North America and other parts of the world. It’s worth noting that Switzerland isn’t part of the European Union, but it does have several bilateral agreements.
The US is still lagging behind: While e-waste recycling programs in the US lag behind those in the EU, they are still mandatory, and companies can incur penalties if they fail to adhere to the rules.
Europe has a comprehensive program: Electronic devices covered by recycling programs in North America consist of cellular phones, television sets, PCs/tablets, and standalone monitors. The more comprehensive EU model includes all electronic devices as well as appliances, and pickup and disposal of all items is typically free of charge.
Offering free pickup and disposal drives participation: Free pickup and disposal greatly improves participation in programs such as incineration for energy.
Switzerland, Sweden, and Denmark recover 99+% of waste through recycling, composting, and incineration for energy (Open Access Government).
Info-Tech Insight
Some countries are forging the path that all countries will need to follow, but developing a global policy is a major hurdle that must be overcome.
Recalls challenge the EU food industry
Recalls are a difficult challenge, especially where food is concerned
In every recall, a tremendous amount of activity occurs for the epidemiologic investigations that are necessary to identify the source of an outbreak or problem and develop corrective actions.
Source for tables: European Commission
Info-Tech Insight
Tools become the company's best friend for answering the difficult questions for safety commission investigations.
Case Study
Westland/Hallmark Meat Co. – Bad Beef
INDUSTRY
Food & Beverage
SOURCES
Food Safety News, 2012
Berkley Product Protection, 2020
Humane Society of the United States, 2020
Meat supplier uncovered for inhumane treatment of livestock and supplying beef from sick animals to consumers.
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Situation The Humane Society of the United States released disturbing video footage of animal abuse to the public. Sickly animals that could no longer walk were being physically abused by prods and moved by forklift. By law, downer cows (animals unable to walk) are not allowed to enter the food supply because they are a risk for diseases like mad cow disease, which can be fatal if consumed by human beings. |
Actions The Humane Society took the Westland/Hallmark Meat Co. to court against a total of nine defendants from the company under the False Claims Act. Westland had signed contracts stating it would provide humane treatment to animals sent to its facility in preparations for the National School Lunch Program. The company went to court and was subsequently found guilty, with a final judgement against the company of $497 million. |
Outcome Westland/Hallmark was unable to pay the largest fine ever assigned for animal abuse. They discontinued operations and became insolvent, forfeiting all their assets as partial payment. Of the nine defendants only two of them (Donald Hallmark Sr. and Donald Hallmark Jr.) reached an agreement for payment, sending only $316,802 to the Department of Justice over five years. The undercover footage resulted in a recall of 143 million pounds of ground beef, including 37 million pounds that had been supplied to the National School Lunch Program. |
143 million pounds of beef recalled
FDA working to decrease US recalls
In 2020, food and cosmetics accounted for 20% of recall events, while 40% were related to medical devices
Info-Tech Insight
Food and cosmetics have been showing a downward trend. Consumer products are showing marginal improvement.
Customs compliance is complex to manage
Customs and border protection (CBP) rules differ somewhat across countries
- The Customs Trade Partnership Against Terrorism (CTPAT ): A voluntary partnership between customs and suppliers that is designed to ensure safe passage of products. Importers, exporters, carriers, customs brokers, consolidators, and manufacturers share the burden of cargo security.
- The Commerce Control List (CCL): Used to determine if the items crossing the border require an Export Control Classification Number (ECCN) and if it is detailed in the Export Administration Regulations (EAR99); determines goods handling.
- Duty Drawback: The company files (normally annually) for the allowable refund of duties, taxes, and fees paid when importing items that they can match with exported or destroyed goods.
- Duty Deferral: A program coupled with Duty Relief or Bonded Warehouse to allow for full or partial relief of duties on goods that are imported and then subsequently exported.
- Regulator Comfort: As compliance and standards bodies become more comfortable with computer validation systems processes there will be a natural progression to accept system-based self-adjusting for adherence to standards.
Duty Refunds
Where possible, customs fees will be held to offset future duties rather than refunding the cash.
ISO is widely used by large businesses
ISO certifications are developed for use by subject matter experts up to the CEO
| ISO Series | Description |
| 9001 | Quality criteria for a quality management system; over 1 million companies in over 170 countries are certified to ISO 9001. |
| 10000 | Customer satisfaction and code of conduct implementation guidelines. |
| 27001 | Data security standards to manage the security of assets such as financial information, intellectual property, and employee details to ensure that only trusted parties can access, share, and use the data. |
| 14001 | Environmental management system for measuring and managing the environmental impacts of the business. |
| 45001 | Occupational health and safety standards to create a safer and healthier set of working conditions. |
| 9004 | Overall quality framework that provides guidance for companies to achieve sustained success at the business management level. |
“It’s one thing to get there once. An entirely different story uses ISO 9004 to … get there once and get there repeatedly. ”
– Jeffrey Hunt, CEO, SHEA Global
Important
The documentation must be the most currently in use to pass audits and gain certification.
Get the right specialty certifications
Certifications options are almost endless for businesses targeting specific customer segments
| RoHS: no hazardous substances | Azo-Free Dye: no toxic chemicals (e.g. bleach) |
| Halal: adheres to Islamic law | Lead-Free: paints and component parts |
| Fragrance Free: no ingredients for scent | Gluten Free: protects people (e.g. celiac disease) |
| ISO 13485 Safe Medical Devices | Sustainable Forestry: sustainable business |
| LEED and WELL: safe building products | Climate Neutral: carbon accountability |
| Energy Star: energy efficient home products | Fair Trade: sustainable livelihood |
| Sustainability Detergents & Chemicals | Organic: no prohibited substances |
| Biocontamination Controlled | Made Safe: no banned substances |
When considering possible certifications, businesses should categorize them as mandatory versus desired and understand any upfront costs that may be required for the transformation.
“Certification takes time and money. There are several steps to organic certification, which are important to consider thoroughly, in advance. Transitioning to organic production can take from 15 to 36 months.”
– John Saunders, Organic Council of Ontario, 2018
Important
Most certifications have specific criteria and costs associated with recertification (normally annually).
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Unlock Sample ResearchContributors
- Brian Buddemeyer, VP, Information Technology, Spang & Company
- Jeffrey Hunt, CA, CPA, CEO, Shea Business Solutions, Chair, ISO Quality & Management
- Jay Stanley, VP IT, Heartland Food Products Group
- Anonymous, Vice president, IT, Food and Beverage Industry