Managing Risk Throughout the Product Life Cycle

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1 Managing Risk Throughout the Product Life Cycle Patrick Donovan Leeton Lee

2 Overview Managing Risks: Basic Principles 7 Product Life Cycle Stages Case Study: Fidget Spinners Questions & Comments 2

Managing Risks: Basic Principles Develop Risk Management Best Practices Do a risk assessment at each stage of the Life Cycle; Identify potential product

3 Managing Risks: Basic Principles Develop 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. 3

4 Stages of the Product Life Cycle 1. Product Concept 2. Supplier Selection 3. Pre-Production 4. Production 5. Post-Production 6. Transportation/Distribution 7. Merchandising/Post Shipment 4

5 A Case Study: Fidget Spinners 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. 5

6 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; 6

1. Product Concept Stage Conduct Design Evaluation & Risk Assessment: Intent is to identify hazards & potential issues; Consider intended users, ages, distribution, and

8 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. 8

1. Product Concept Stage Review & Apply Your Compliance Policies Ensure your company has policies addressing 5 Pillars of Responsible Sourcing Product quality;

10 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. 10

12 1. Product Concept Stage Establish Compliance Protocols Ask client if any special testing, audit, or inspection requirements; Consult 3 rd 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. 12

2. Factory Selection Stage Communicate Your Expectations Give factory all vendor compliance policies & procedures now; Have vendor packet documents issued & signed; Establish quality levels, defect

14 2. Factory Selection Stage Communicate 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. 14

15 2. Factory Selection Stage Evaluate 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 QC & product safety procedures Manufacturing processes Testing procedures Social responsibility policies Code of conduct Audit history & supporting documents Operational permits & certifications Tab 1 Environmental policy Chemical & waste management procedures Employee hiring and firing practices Plant security measures Shipping practices and partners Procedures for container & trailer security 15

Social accountability; Technical capabilities & capacity; Good manufacturing practices; Structural,

17 2. Factory Selection Stage Verify Self-Assessment through 3 rd 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. 17

product s design, fit, feel and function meet your specifications; Have

19 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. 19

client s approval of factory or samples, if needed, now; Confirm completion

20 3. Pre-Production Stage Pre-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. 20

21 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. 21

quality Inspection, using specs and approved samples; Review audit and

22 3. Production Stage Quality 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. 22

4. Production Stage Safety and Compliance Testing Test production units for chemical and mechanical safety and compliance; Verify compliance of labeling, and warnings Age grading; small parts/choking

24 4. Production Stage Safety 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; singleuse; Producer s markings, and country of origin; Do drop tests at the DuPro inspection to reduce transit damage or environmental harm. 24

5. Post-Production Stage Pre-Shipment Inspection & Testing Do a pre-shipment inspection ( PSI ); QC is critical before order leaves factory; Use ANSI/ASQ sampling plans, AQL, and

26 5. Post-Production Stage Pre-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. 26

ISTA Guidelines; Certain products may have unique packaging, label and

28 6. Transportation/Distribution Stage Packaging, 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) 28

6. Transportation/Distribution Stage Cargo Security Do pre-shipment packaging, packing and labeling inspection; Do 7-point container and 17-point trailer inspections for security and

29 6. Transportation/Distribution Stage Cargo 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. 29

6. Transportation/Distribution Stage Incoming

IQC ) inspection on products, and provide factory

steps; make corrections before releasing product

32 6. Transportation/Distribution Stage Incoming 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. 32

7. Merchandising/Post-Shipment Stage Product & Market Surveillance Establish customer reporting procedures, data-collection methods, and management oversight; Monitor and collect all consumer

33 7. Merchandising/Post-Shipment Stage Product & 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; 33

35 7. Merchandising/Post-Shipment Stage 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. 35

Key Takeaways Risk Management is Critical for Your Success 1. Whether you are a supplier, distributor, end buyer, licensor or consumer, you have risk exposure; 2.

37 Key Takeaways 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. 37

Leeton Lee Consultant (818) 800-7318 leeton@complybox.

38 Leeton Lee Consultant (818) Patrick Donovan Director of Import & Compliance (425)

39 Please complete your session evaluation now to receive credit for session attendance.

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