Managing compliance both for external groups and for internal purposes doesn’t have to be a nightmare. In fact, doing it the right way, for the right reasons, can be a competitive strategy.

The first thought that often comes to mind when someone says “compliance” involves operating within laws to avoid fines and negative publicity. Yet compliance applies equally well for ensuring each product sold meets high standards for quality.

Internal Compliance
Internally, compliance enables an organization to raise quality standards in the enterprise to exceed customer expectations and subsequently gain market share. Using a compliance program for the purpose of raising quality offers four ways to manage production. IndustryWeek.com explains that manufacturers who “have turned compliance into a competitive weapon” take the following steps (edited):

1) Evaluate and sometimes redefine supply chains, production processes and quality-assurance standards to reduce bottlenecks.
2) Measure quality in new ways along with using older ways to gain insight into which processes are under-performing and the circumstances responsible for defective processes.
3) Use compliance and quality management software to automate areas that will give the best return on investment.
4) Report exceptions and fine-turn the process.

Culture of Quality
When starting or re-energizing an internal compliance program, it helps to create a “culture of quality in your supply chain,” IndustryWeek adds. Supply chain partners must know that your company expects them to meet a very high level of supply-chain quality standards.

Interlink Inspection and Audit
By defining the processes that interlink inspection and audit to supplier ratings, manufacturers encourage each supplier to use improvement strategies. An enterprise compliance and quality management approach can motivate each supplier to make continually higher-quality products.

Tracking Corrections and Changes
As both your business and your suppliers make changes to boost quality, potential future defects can be prevented by starting, implementing and verifying change effectiveness resulting from any nonconforming processes. If the tracking system is customizable, then the company will have the power to resolve problems regardless of how simple or complex they might be.

Some firms document engineering change notices (ECNs), as inadequate change control can expose a company to product liability. IndustryWeek explains that “by automating compliance, the ability to automate ECN workflows, including the allowance for multiple and often parallel signature, can save hundreds of hours a year.”

Differentiate by Quality Performance
By automating compliance processes, a manufacturer can raise quality, which can in turn lead to the ability to highlight product- and service-quality performance. When a company’s product and service provide top value, this fact distinguishes the company from competitors.

External Compliance
Today there are more strict export regulations and more exporting activities. Together, these create a crunch for corporate compliance managers.

Cost Savings
The government-created lists of “denied” potential customers went from being issued about twice a year to daily after the terrorist attacks on the World Trade Center in September 2001. The size of the list went from dozens to hundreds of thousands, Jane Solomon, a trade compliance veteran at the U.S. business of technology company Anritsu, recently told Supply & Demand Chain Executive.

Despite the greater workload, accurate screening is essential when you consider the potential fines. One company agreed to a $100 million fine imposed after admitting it illegally exported restricted night-vision technology to customers who should not have received it.

Anritsu invested in installing hosted automated trade compliance software. It enabled the firm to reduce compliance staff from 30 to three, allowing the 27 people to work at other more value-added tasks. Solomon explains there are hard and soft cost savings gained by using this software.

One form of soft savings lies in avoiding fines issued by regulatory agencies (such as the U.S. Bureau of Industry and Security). Another form comes from fewer errors, “because there is an automated process in place that is not dependent on someone’s memory of the regulation or their ability to find the appropriate process to follow,” notes IndustryWeek.com.

Yet analyst firm Aberdeen Group reports that more than 60 percent of large enterprises involved in global trade today don’t use any kind of dedicated technology to support their compliance programs, relying instead on traditional methods such as spreadsheets, e-mail and fax machines. (Source: IndustryWeek.com)

All of this having been said, the key reasons for considering automating compliance can best be summed up this way:

• It permits a methodical way to improve quality;
• It allows for differentiation in the market when the user views compliance as a helpful tool rather than a distasteful chore to be endured; and
• It brings efficiency, cost-savings through reduced staff requirements and error minimization to regulatory management processes.

Resources

Ten Reasons to Automate Manufacturing Compliance
by Louis Columbus
IndustryWeek.com, Feb. 29, 2008

Selling Compliance Automation
by Andrew K. Reese
Supply & Demand Chain Executive, Dec. 19, 2007

Tools of the International Trade
by Nick Zubko
IndustryWeek.com, Feb. 1, 2008