Managing Risk Throughout the Product Life Cycle

Patrick Donovan Leeton Lee

Overview

• Managing Risks: Basic Principles

• 7 Product Life Cycle Stages

• Case Study: Fidget Spinners

• Questions & Comments

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Managing Risks: Basic PrinciplesDevelop Risk Management Best Practices

• Do a risk assessment at each stage of the Life Cycle;

• Identify potential product hazards and sourcing risks;

• Take steps to eliminate hazards & risks;

• Protect your reputation and business;

• Reduce injuries, recalls, lawsuits and lost profits.

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1. Product Concept

2. Supplier Selection

3. Pre-Production

4. Production

5. Post-Production

6. Transportation/Distribution

7. Merchandising/Post Shipment

Stages of the Product Life Cycle

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• Fast ramp-up due to popularity and industry’s desire to catch the wave;

• Assessing product hazards;

• General use product or children’s product?

• Testing, audits and inspections;

• Other supply chain risks;

• Customer complaints and CPSC reporting.

A Case Study: Fidget Spinners

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1. Product Concept Stage

Define Product Specs (If Custom Item)

• Basic product and functional specs;

• Size and dimensions;

• Functionality, usability, durability, etc.;

• Materials - Develop BOM and specs;

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1. Product Concept Stage

Conduct Design Evaluation & Risk Assessment:

• Intent is to identify hazards & potential issues;

• Consider intended users, ages, distribution, and regulations;

• Evaluate materials and components, production methods, packaging and labeling;

• Review hazardous substances and chemicals in materials; and

• Look for physical & mechanical hazards.

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1. Product Concept Stage

Review & Apply Your Compliance Policies

• Ensure your company has policies addressing 5 Pillars of Responsible Sourcing

• Product quality;

• Product safety and compliance;

• Social accountability;

• Environmental stewardship; and

• Import/export compliance.

• Hazards and risks are present in all 5 Pillars.

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1. Product Concept StageEstablish Compliance Protocols Ask client if any special testing, audit, or inspection requirements;

• Consult 3rd party partners to establish protocols for:

• Product test plans (chemical, physical, and labeling & warnings);

• Social & environmental factory audit (protocols, standards, & key risks );

• QC inspection (product specs, AQL, & sample size); and

• Do internal & external review of compliance procedures & expectations.

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2. Factory Selection StageCommunicate Your Expectations

• Give factory all vendor compliance policies & procedures now;

• Have vendor packet documents issued & signed;

• Establish quality levels, defect ranges and regulatory limits for testing;

Internal controls and documents

• Product safety, quality, social compliance, environmental and import/export manuals;

• Share with factory; sign and return;

• Inform, coach and implement, and enforce.

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2. Factory Selection StageEvaluate Factory’s Compliance Processes

• Verify your factory can meet compliance requirements;

• Factory to fill-out a 5-pillar compliance and capabilities questionnaire;

• Review factory’s compliance program documentation Tab 1

✓ QC & product safety procedures✓ Manufacturing processes✓ Testing procedures✓ Social responsibility policies✓ Code of conduct✓ Audit history & supporting documents✓ Operational permits & certifications

✓ Environmental policy✓ Chemical & waste management procedures✓ Employee hiring and firing practices✓ Plant security measures✓ Shipping practices and partners ✓ Procedures for container & trailer security

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2. Factory Selection StageVerify Self-Assessment through 3rd Party Audits

• Do a pre-audit visit or a full facilities audit?

• Social accountability;

• Technical capabilities & capacity;

• Good manufacturing practices;

• Structural, fire & electrical safety;

• Environmental;

• Issue CAP for nonconformities & assist factory;

• Do post-audit review; see if factory is able to reduce risk in the five pillars and in all stages.

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3. Pre-Production Stage

Pre-Production (PP) Sample Approval

• Last chance to “design out” potential hazards and defects;

• Sign-off on samples only if product’s design, fit, feel and function meet your specifications;

• Have test lab verify packaging, labeling, materials, and components comply.

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3. Pre-Production StagePre-Production Approval of Factory

• Hold pre-production call or meeting w/ Factory;

• Review samples w/ factory;

• Get client’s approval of factory or samples, if needed, now;

• Confirm completion of all corrective action plans (CAPs);

• Get written and photographed proof of corrections.

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3. Pre-Production Stage

Factory Scorecard

• Use it to assess key performance and compliance strengths and weaknesses;

• Coach factory to reach performance and compliance objectives before production.

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3. Production StageQuality Process Audit and Du-Pro Inspections

• Conduct a process audit just as production begins;

• Conduct a during production (“Du-Pro”) quality Inspection, using specs and approved samples;

• Review audit and inspection results with factory’s management;

• Prepare a CAP and partner with the factory.

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4. Production StageSafety and Compliance Testing

• Test production units for chemical and mechanical safety and compliance;

• Verify compliance of labeling, and warnings–

✓ Age grading; small parts/choking hazards;

✓ CPSIA children’s product tracking labels;

✓ Use instructions; battery single-use; single-use;

✓ Producer’s markings, and country of origin;

• Do “drop tests” at the DuPro inspection to reduce transit damage or environmental harm.

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5. Post-Production StagePre-Shipment Inspection & Testing

• Do a pre-shipment inspection (“PSI”);

• QC is critical before order leaves factory;

• Use ANSI/ASQ sampling plans, AQL, and protocols;

• Conduct random “audit testing” of production units;

• Issue a CAP for any failed inspection or tests;

• Confirm CAP items were completed;

• Do re-inspection or retest, if needed.

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6. Transportation/Distribution StagePackaging, Packing, & Labeling Compliance

• Ensure packaging and packing will safeguard product;

• Suggest factory follows ISTA Guidelines;

• Certain products may have unique packaging, label and transportation requirements (specific transit or environmental damage; other shipping hazards)

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6. Transportation/Distribution StageCargo Security

• Do pre-shipment packaging, packing and labeling inspection;

• Do 7-point container and 17-point trailer inspections for security and fitness;

• Inspect container seals, log numbers;

• Approve shipping documents such as BOL, HTS classifications, duties, FDA codes, and invoices;

• At arrival, do container and seal inspections.

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6. Transportation/Distribution StageIncoming Quality Control

• Do an incoming quality control (“IQC”) inspection on products, and provide factory with results;

• Formalize a CAP with all needed steps; make corrections before releasing product for distribution;

• Reject, return or destroy non-conforming products.

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7. Merchandising/Post-Shipment StageProduct & Market Surveillance

• Establish customer reporting procedures, data-collection methods, and management oversight;

• Monitor and collect all consumer safety and injury complaints;

• Report returns data and serious complaints to management and outside experts;

• Quickly and thoroughly investigate all complaints and reports of defects or harm;

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7. Merchandising/Post-Shipment Stage

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CPSC Reporting and Recall• Consider CPSA Sec. 15(b) report;

• A recall may be needed if complaints indicate safety defect, substantial product hazard or nonconformity;

• Do testing to verify;

• Consult with compliance and legal experts; and

• Partner with CPSC for guidance.

Key Takeaways

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Risk Management is Critical for Your Success 1. Whether you are a supplier, distributor, end buyer,

licensor or consumer, you have risk exposure;

2. Risk is present in all 7 stages of the product life cycle, and can affect all 5 Pillars of Responsible Sourcing;

3. Risk reduction is most important in the early stages: product concept, factory selection, and pre-production;

4. Continue risk assessments, audits, testing and inspections in later stages; and

5. Monitor and handle all product returns and complaints.

Leeton LeeConsultant

(818) 800-7318leeton@complybox.com

Patrick DonovanDirector of Import & Compliance

(425) 502-5831patrick.donovan@sunriseid.com

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