No matter the industry, the effort of maintaining manufacturing compliance consumes enormous resources within an organization. In the U.S. alone, manufacturers pay $19,564 per employee on average to comply with federal regulations, almost twice as much as the per-employee costs shouldered by all firms. The nature of today’s global marketplace makes U.S. regulations a crucial factor for any organization with transnational goals in mind. Further, doing global business means tracking and complying with regulations in multiple markets — regulations that notoriously are in constant flux, with new technologies, strategies and political winds driving rapid change.
So, what does meeting manufacturing requirements look like? It’s expensive, complex and time-consuming — but it’s also an outright bargain compared to not meeting manufacturing regulations in target markets. One benchmark study that specifically looked at data-privacy regulations found that meeting standards cost $5.47 million per company, while noncompliance costs could run to $14.82 million.
These big numbers reflect the importance of manufacturing as a contributor to worldwide value. Manufacturers not only produce the materials needed across all aspects of society, but they offer a more significant downstream benefit. After all, for each full-time equivalent job in manufacturing dedicated to producing value for final demand, 3.4 full-time equivalent jobs are created in nonmanufacturing industries, according to the MAPI Foundation.
Why is Compliance Critical in the Manufacturing Industry?
While it comes with costs, a manufacturing compliance plan offers many rewards for ensuring quality and efficiency in today’s organizations — and helps these organizations avoid devastating repercussions. Consider some numbers: In 2019, a worker died every 99 minutes from a work-related injury, according to the U.S. Bureau of Labor Statistics. 2019 also saw the highest worker-fatality numbers since 2007. Safe Work Australia found that work-related injury and illness cost the national economy $61.8 billion in a 2013 report.
The repercussions for carelessness can be financially devastating even to the most sink-proof firm. Turn to your news source of choice, and you’ll find a nonstop ticker-tape of fines and other consequences levied against companies: a $234,000 fine against a water technology company after a worker falls, £53,000 for two firms after a construction accident, $6.6 million for Boeing after the U.S. Federal Aviation Administration cited the company for not prioritizing regulatory compliance.
Overview of Manufacturing Regulations and Standards
Let’s look at some of the key determiners of regulations and guidance that affect manufacturing.
Good Manufacturing Practices (GMPs)
As applied to pharmaceutical production as well as food and beverage, dietary supplements and other products, GMPs are indicators of best practices undertaken in the production of consumable goods. The generic label is a clue to the variable sources of GMP. Globally, GMP standards are authorized by governmental bodies including the World Health Organization (WHO), the Chinese Ministry of Health, the U.S. Food and Drug Administration and Health Canada.
The GMP association with the pharmaceutical industry can be traced back to several 20th-century incidents, from deaths associated with diethylene glycol in medications in the 1930s to thalidomide-related birth defects later in the century. The WHO describes GMP as, “aimed primarily at diminishing the risks inherent in any pharmaceutical production, which may broadly be categorized in two groups: cross contamination/mix-ups and false labelling. Above all, manufacturers must not place patients at risk due to inadequate safety, quality or efficacy; for this reason, risk assessment has come to play an important role in WHO quality assurance guidelines.”
Developed and published by the International Organization for Standardization, ISO standards reflect the wisdom and experience of experts in a large number of fields. Based in Switzerland, the organization is an independent nongovernmental entity composed of 165 national standards bodies. Well-known standards such as the ISO 9000 family, which cover quality management in production, and ISO 45001, occupational health and safety, are joined by specific standards for child safety seats (ISO 13216) and standards for currency and country codes.
ISO standards are regularly reviewed and updated. In April, the organization announced updated standards related to nanotechnology, outlined in a news article “The Science of Tiny Little Things,” as well as updates to standards that support ISO 9001, “Getting the Best Out of ISO 9001.” Numerous standards related to additive manufacturing — also known as 3D printing — are under development.
And then there’s COVID. As countries and organizations across the world experience waves of infection and recovery rates asynchronously, COVID-19 looms large over manufacturing and the regulations and guidance put in place to ensure the safety and quality of its workers and output. The ongoing pandemic is an example of how current events affecting either a region or the entire globe can change the regulatory environment instantly — and make it essential for an organization to stay nimble.
Representatives of the Food Safety Authority of Ireland and Nestlé recently reflected on the turbulence of responding to COVID-19 challenges from regulatory and production viewpoints. Authority director Wayne Anderson said, “We had to focus on securing food safety rather than the technical compliance with legislation. So it was important we made sure food was safe even if we had to relax our approach to things like origin labeling. We had to facilitate short term changes in suppliers and substitution of ingredients which were caused by the disruption to supply chains while ensuring that businesses still maintained allergen labeling. The food chain became more vulnerable to food fraud and quality and safety issues as due diligence in suppliers wasn’t possible at the time.”
In the United States, the Centers for Disease Control (CDC) issued guidance to the manufacturing industry to manage the risk associated with the disease against the need for vital services and products. In April 2020, the CDC identified critical infrastructure workers, including those in “critical manufacturing,” in an advisory memorandum. It outlined how workers may be permitted to continue work “provided they remain asymptomatic, have not had a positive test result for COVID-19, and additional precautions are implemented to protect them and the community. This option should be used as a last resort and only in limited circumstances [. For instance,] when cessation of operation of a facility may cause serious harm or danger to public health or safety. […] Promoting the ability of such workers to continue to work during periods of community restriction, access management, social distancing, or closure orders/directives is crucial to community resilience and continuity of essential functions.”
Those are just a few areas and entities with regulations applying to the manufacturing industry. Many countries have implemented standards and ensure enforcement, often closely aligned with GMP and ISO regulations and guidance — Brazil’s Normas Regulamentadoras, for example.
(Learn more about what GRC is or how governance, risk and compliance are trending in 2021.)
Steps for an Effective Manufacturing Corporate Compliance Plan
To ensure an organization is keeping up with changes not only regionally but worldwide — and not only industry-specific but with safety and quality regulations that are industry-agnostic — leaders must take certain key steps to develop a manufacturing compliance plan.
Step One: Measure — and Measure Again
A regulatory audit is no one-and-done deal. In its 2020 Cost of Compliance report, Thomson Reuters cited “keeping up with changes” as the biggest challenge in compliance-facing firms. Yesterday’s compliance outlook is minimally relevant to what is required of an organization operating in today’s industries. Conduct a thorough review, and then establish a schedule for ongoing evaluation and adjustment.
Step Two: Implement Changes Effectively and Efficiently
Understanding where the organization needs to go obviously falls heavily on the shoulders of senior leaders. When faced with an audit of numerous remedial needs, it’s critical to understand the big picture of the company’s goals for growth and brand positioning to establish the right priority for addressing necessary changes. Evaluate your audit against the organization’s mission and strategic plan to determine the best course of action without losing time. And, to succeed at step two, it’s important to consider step three…
Step Three: Identify and Assemble the Right Team
The 2020 U.S. Bureau of Labor Statistics reported that, while government entities had the highest number of employed compliance officers, industries with the highest concentration of professionals in the role included Other Pipeline Transportation (1.53% of the industry) and Pharmaceutical and Medicine Manufacturing (1.47%). But responsibility doesn’t begin or end with a compliance officer. Specific roles across an organization will be called on to play their part in addressing noncompliance, preventing issues and successfully implementing process changes. Most importantly, these teams and individuals need access to the C-suite to ensure timely information and appropriate strategies are shared and acted upon as part of an overarching plan.
Step Four: Evaluate and Improve Your Processes
Let’s face it: Sometimes, staff and organizations fail at compliance because, for whatever reason, noncompliance is easier — either less time-consuming or less burdened by redundant, frustrating tasks and red tape. Suppose your organization is struggling with ongoing compliance issues at a role-based level, in a department or across a system. In that case, it’s time to take a look at whether you’re using the right tools to make compliance simpler. Automation of tasks and processes can not only simplify compliance, but lighten the load on teams that are losing precious work hours on complicated, repetitive procedures.
Step Five: Plan for the Next Review
The best time to begin planning for the next review is right after the last one is over. Assemble the team, gather lessons learned about what worked and what needed improvement and establish your plan to repeat the cycle. After all, the regulatory environment won’t stand still. No organization can afford to standstill, either.
(Read more about the stages of an effective regulatory compliance program.)
Statutory Compliance Checklist for Manufacturing Companies
Understand which regulations apply to your industry. Depending on your industry niche, your region and where you do business, different regulations and guidance will apply to your operations. Using the right tools to track and ensure ongoing compliance will be critical to staying on top of all of them.
Maintain useful, appropriate documentation. Documentation is not only necessary for tracking your own progress. It will be critical when an organization is called upon to show evidence of its efforts to address and make progress on its compliance efforts. Ensure a consistent, usable, up-to-date and secure repository is available for teams and leaders who need it.
Help staff stay updated and efficient with regular training: Once established, inertia is hard to overcome, so the best strategy for creating and supporting effective teams is regular communication and training. Supported by tools that encourage consistent processes and compliance, ongoing training will ensure employees remain aware of the big picture and their role in their organization’s growth and success.
Equip Your Teams with the Right Tools for Successful Manufacturing Compliance
No organization’s leaders can be expected to navigate manufacturing compliance in a vacuum. Manufacturing organizations need technology that can help internal audit and compliance teams measure their compliance with standards, frameworks and regulations, identify gaps and apply remedial tasks to help drive continual improvement and business continuity.
Diligent Compliance provides teams with the appropriate tools to stay abreast of changes in the regulatory outlook. Implementing the right solutions provides the peace of mind that leaders are doing exactly what is needed to minimize risk to their employees, products and services, and bottom line.
Manufacturing compliance is achievable and maintainable. Schedule a demo today to learn more.