Managing social and regulatory compliance in an era of increased legislation is yet another challenge facing retailers and manufacturers. The good news is that companies can in many cases take advantage of product lifecycle management (PLM) systems that include chain management and global sourcing functions.

The California Transparency in Supply Chains Act took effect on 1 January 2012, the latest in a series of legislative initiatives that place new compliance burdens on retailers and brands.

According to the Act, also known as SB 657, retailers and manufacturers must publicly disclose their efforts to eradicate slavery and human trafficking from their supply chains by posting disclosures on the home page of their corporate website. The Act affects all retailers and manufacturers with annual worldwide gross receipts over $100m doing business in California - an estimated 3,200 companies worldwide.

The California Transparency in Supply Chains Act requires companies to disclose their compliance in five areas:

  • Third-party verification of supply chains to evaluate the risks of slavery and human trafficking.
  • Independent, unannounced audits of suppliers to determine compliance with company standards on slavery and human trafficking.
  • Certification that all materials comply with existing laws on slavery and human trafficking.
  • Internal accountability standards and procedures for all employees and contractors.
  • Training on human trafficking and slavery for company employees and management with direct responsibility for supply chain management.

As just-style noted in a recent article, while the law doesn't carry criminal penalties, "the public relations consequences are what is really at company wants to post or link a disclosure that says it is not addressing the possibility of slavery and human trafficking in the supply chain."

Regulatory burdens keep increasing
'CPSIA, SB 657, Cadmium Testing' is just the latest example in a recent series of legislative initiatives.

The Consumer Product Safety Improvement Act (CPSIA), passed in 2008, mandated strict regulations that are intended to reduce lead content, particularly in children's goods, with new product safety and testing guidelines for children's products, along with all consumer products. Compliance is both complex and expensive, requiring detailed General Certificate of Conformity (GCC) documents for every component of a garment or product.

Cadmium testing has become yet another hot-button issue, because of its widespread use in children's jewellery and toys. In the US, a number of states have established strict cadmium requirements, creating yet another set of legislative mandates for manufacturers and importers.

Managing social and regulatory compliance
As regulations and legislative initiatives continue to proliferate, retailers and manufacturers are searching for solutions to help manage the increasingly burdensome requirements.

The good news is that companies can in many cases take advantage of product lifecycle management (PLM) systems that include chain management and global sourcing functions - which we refer to as Extended PLM.

These systems include the workflow calendars, exception management and global collaboration features that make it easy to schedule audits and tests, stay on top of deadlines, and maintain all required documentation.

With SB 657, for example, the features of an Extended PLM system can help with all the details of compliance, as illustrated below:

  • The system's Vendor Profiles contain all the current documentation for each supplier (such as audit compliance forms for the California Transparency in Supply Chains Act and C-TPAT (Customs Trade Partnership Against Terrorism) documents. The vendor profiles can be accessed throughout the worldwide supply chain, ensuring that the documentation is always available.
  • Proactive Calendars determine expected audit and re-certification dates and notify retailers, brands and factories of upcoming expirations. Third-party testing firms can use the system to gather information related to each supplier and update the vendor profile as needed. Calendars and audit schedules can be assigned to each factory, and the system will reschedule testing and assign a corrective action plan if factories don't pass the audit. Once corrective actions are taken, the system stores the evidence in the vendor profile.
  • Exceptions can be created to alert management when POs are written to vendors that have not been certified or whose certification has expired. The calendars can also be used to ensure that employees and managers receive the required training on human trafficking and slavery.
  • The Collaboration engine documents each communication related to regulatory compliance and stores it in the software, where it can easily be accessed. This centralised portal greatly simplifies supply chain collaboration by storing all relevant communications, eliminating the need to rely on email or fax.

Extended PLM systems can encompass the full range of social and regulatory compliance, from SB 657 to CPSIA as well as new regulations that will inevitably occur in the coming months and years. And in addition to streamlining compliance, these systems can also improve margins, reduce cycle times, boost efficiency, control costs and improve product quality - all proven benefits of PLM and supply chain management systems.

The author of this article, Mark Burstein, is president of sales, marketing and research and development at NGC Software.