Recent compliance requirements highlight the need for retailers to implement efficient and effective systems for managing vendor data.
By Nick Parnaby
When sales, profits and brand reputation are on the line, it’s time to reconsider the “just coping” approach to compliance management.
The recent introduction of tough new regulations in consumer product safety has put compliance management back in the spotlight for merchandising support organizations at every U.S. grocer. Earlier this year, new aspects of the Consumer Product Safety Improvement Act (CPSIA) came into effect. The new regulations are designed to protect consumers—primarily children 12 and under—from products or packaging that may contain dangerous quantities of harmful substances.
Unlike some regulatory initiatives, the CPSIA has real teeth. Merchants and manufacturers can expect to face tough fines of up to $100,000 per incident and $15,000,000 in aggregate if caught unprepared and unable to produce the necessary certificates demonstrating that they met the testing requirements. Voluntary and mandatory recalls are also well within the realm of possibility following store inspections.
Yet, the CPSIA regulations are just one example from a very long list of compliance requirements expected from modern merchants and their trading partners. With retailers increasingly sourcing from emerging markets, compliance management has emerged as a critical business process. Surprisingly, very few retailers have invested in systems that help them execute compliance consistently and efficiently. Most merchandising support functions are supported by a small number of overburdened and under-automated administration staff.
It is these overwhelmed employees that are “just coping” with maintenance of vendor data, spanning risk, compliance and credential information for every trading partner that the business chooses to engage. With every new compliance initiative, the vendor profile becomes more complex—regulatory data that must be recorded; certificates and documents that must be stored, refreshed and renewed. For CPSIA alone, it is possible that compliance staff may need to track certificates for up to 20,000 individual SKUs and associated packaging materials.
For grocers engaged in private label sourcing from emerging markets, the effort is even more complicated. The compliance team must amass an extremely detailed picture of environmentally conscious manufacturing practices, HR policies, quality procedures, capacity threats, risk indicators and socially responsible work practices for vendors and their factories. Audit data must be captured; incidents tracked; remediation plans collaboratively developed, agreed and executed. The amount of data to be managed is daunting, but the threats to a business and its reputation are even more daunting.
Further complicating matters, all this activity around compliance information management doesn’t come cheap. AMR Research estimates businesses spend “up to $1,000 per supplier annually to manage their supplier information across the enterprise.” Grocers have among the largest supplier or vendor communities of any industry, with 1,500 to 15,000 trading partners.
Maintaining rich compliance information profiles for vendors shouldn’t be a manual activity. In addition, storing these profiles and keeping them current shouldn’t be a decentralized, departmentally specific responsibility.
Imagine the value of a 100% shareable, always-on profile regarding every vendor with whom you do business. Imagine access to add, edit or search for vendor credentials and compliance information via a web browser in any geography. Consider how much administrative overhead and cost can be reduced when vendors can maintain their own compliance-related content on a self-service basis and follow an automated web-based process of registration with your company and its purchasing policies. Imagine how much more effective your continuous improvement plans can be when multiple parties are able to collaborate and track progress in a secure, online environment.
Until recently it would be impossible to conceive that a solution of this kind might be within reach of a Merchandising Support budget. However, the rise of Software-as-a-Service (SaaS) solutions have created an alternative option to the “just coping” approach, providing retailers with an easy, low-trauma, cost-effective approach to vendor compliance and data management.
So, as your company makes decisions upon how to deal with CPSIA and ongoing access to vendor product testing certificates, it may be time to take a step back and consider a more scalable strategy for all of your vendor compliance endeavors. With brand reputation and profits at risk, you simply can’t afford not to.
Nick Parnaby is the chief operating officer of RollStream Inc, a SaaS solution for engaging trading partners in compliance, information, risk and performance optimization based in McLean, Va. He can be reached at firstname.lastname@example.org.