Why Compliance Is A Competitive Advantage
The promotions industry is a strange and complex place. Even though we serve the largest companies in the world, our industry’s foundation is built on small-business entrepreneurship. There is a lot of which to be proud. Our industry was one of the first to forge trading lines with Asia back in the 1980s, and we continually bring new innovations to advertising. Plus, the range of products we offer is vast with useful and memorable items from dish towels to electronics.
When it comes to compliance, however, our industry has not been a trailblazer, and I think it’s safe to say that it took us some time to get on the bandwagon. A mere five years ago, few industry companies were active in the product responsibility space. But since then, PPAI and others have gotten us up to speed quickly with initiatives such as the PPAI Safety Aware Program, and we’ve been commended by the Consumer Product Safety Commission for being a model industry in terms of how we have responded to the call for compliance.
But I can tell you firsthand that there is still a lot of work to do. As an industry, we are responsible for the safety of the products we put into the marketplace. However, I’d estimate that at least 50 percent of the people reading this article work in a company with no compliance program of which to speak.
Where To Start
As a consultant, most of my new clients call me with a similar question:
“We have a great opportunity with a big client, but they’re asking us about our compliance program. We don’t have good answers for them. Can you help?”
What follows is a scramble to bolster an underdeveloped compliance program—or create one—in order to win the sale. Unfortunately, this only works about half the time. Companies can tell when you are scrambling, and the companies that already have a compliance program usually come out on top. The fact is, you just can’t compete without one these days.
The bigger the client, the more likely compliance is going to be a requirement to do business; it’s no longer just a nice-to-have option. And lately the end buyers’ concerns are not just about being legally compliant—many large companies and organizations are pushing for new levels of transparency and demanding standards above the U.S. regulatory limits.
This era of transition brings a lot of opportunity. For years, promotional products flew under the radar, but after several recent recalls and Proposition 65 lawsuits, our industry is in the spotlight. End buyers, however, don’t want to spend a lot of time learning about product responsibility—they want a one-stop solution where they can buy products that are already compliant and safe, and they are looking for partners who can provide this.
I see the current interest in compliance now being driven by a carrot instead of a stick. In other words, the promise of increased sales, instead of the threat of a costly recall, is now the incentive to become compliant. When you give a customer the safe, one-stop solution they need, they are relieved and grateful, and often will drive more business to your company simply because it’s easier than trying to find other compliant companies. There’s a trend among companies to reduce the number of vendors they work with to lessen their risks and leverage volume, and most of the time companies without a compliance program are the first to be cut.
So how do distributors create a compliance program that will bring in more sales while reducing business risk?
Here are five ways you can impress your clients:
1. Have a program in place. Start a compliance program before you’re asked about it by a client. Even if it’s not perfect, most end users will be impressed if you have a foundation already in place. Typical first steps include developing a testing plan for the products you sell and organizing the related documentation so it’s available on demand. If any of your products might be considered a children’s item, having a program in place is especially critical. (Tip: Any product can be considered a children’s item if its decoration is determined to appeal to children.)
2. Get help; don’t try to go it alone. Experts can help you navigate the regulatory landscape and give you product-specific testing strategies. PPAI offers a number of informative classes at live events, trade shows and through live and on-demand webinars that can give you a working knowledge of the main issues. Also, don’t rely on just one source of information, particularly if the person giving you that information is also selling services. It can get expensive.
3. Commit to an integrated program. Compliance programs that operate independently of other areas of the company are usually not the most effective. Programs that have an impact on how all departments operate including sourcing, sales, quality assurance, etc., take a better approach. Compliance is a group effort. Also, assign an existing employee or hire a new employee to take on the role of compliance manager or a similar title. In many cases, it’s a full-time job. Choose carefully, though; that person will likely be in constant contact with every manager in your company.
4. Get the word out. Find ways to consistently promote your compliance program to your customers. Make sure your sales force can speak to compliance and transparency, and post your company’s compliance approach on your website. Some big-company prospects want to operate within an environment of compliance but don’t know how to manage it. Offering them a convenient solution can lead to exclusivity and higher-volume orders.
5. Prepare for increased costs. There is no getting around it; compliance will require an up-front investment and possibly the addition of a headcount or two. As you learn more about your supply chain and start product testing, you may discover why some of your suppliers’ prices were so inexpensive and may be forced to eliminate them from your supply chain. Add to that the costs related to testing, auditing and using more expensive materials, and you might have to raise your prices slightly to cover your costs.
When it comes to compliance, one size does not fit all. The cost and breadth of your compliance program will depend on many factors, including the size of your customers and the types of products you offer. In many cases, you can make small changes at the start that have a big impact toward increasing safety and reducing risk.
For companies currently running a compliance program and for those considering it, it’s important to know that the biggest challenge with investing in it is competing with companies who won’t. It’s not uncommon for companies to become frustrated when they lose a sale to a competitor who can offer products less expensively because they use a non-compliant supplier or operate within a non-transparent supply chain. Unfortunately, some large end-user companies perpetuate this; they publically demand more compliance and transparency but don’t discipline their buyers who still chase pennies. They want it both ways.
I believe this is temporary, however, as I’ve personally seen dozens of companies reach that tipping point and realize that spending a little bit more for a compliant product is worth it. In a few years, that kind of thinking will be the norm. And those companies who are first to market with a good compliance solution will still be around to see it.
Josh Kasteler is a compliance consultant with experience that spans several industries, including a stint living in Asia and working in Asian factories. He can be reached at josh@promocompliance.com.
