Recent and emerging regulations across multiple countries and regions are putting pressure on all manufacturers, from batch processors to complex discrete industries, to strengthen their capabilities around traceability and chain of custody. Pharmaceutical companies, for example, have renewed urgency to meet California’s new e-pedigree law due to take effect in January 2015, which requires serialization and full upstream and downstream genealogy. These laws are meant to ensure public safety and to help eliminate counterfeiting which poses significant health and safety risks.
A quick Google search uncovers the following sample of regulations manufacturers must respond to:
- US Federal Track and Trace law 21 U.S.C. 355e
- 2011 FSMA attempts to move towards prevention rather than reacting/responding
- European Union (EU)’s European Food Safety Authority (EFSA)’s Regulation EC/178/2002
- Bio Terrorism Act 2002, Section 306: one up, one back tracking
The volume of regulations impacting manufacturing operations is hardly a new challenge. Over the past 20 years, regulations have steadily increased. According to a recent study: “Macroeconomic Impacts of Federal Regulation of the Manufacturing Sector,” it is estimated that “2,183 unique regulations have been imposed on the manufacturing sector between 1981 and April 2012,” most coming from the EPA in the United States (source). According to the National Association of Manufacturers, these regulations are costing the manufacturing industry between $265 and $726 billion a year, a large chuck of the $1.7 trillion a year manufacturing industry.
Regardless of where a business is domiciled, manufacturers are subject to the regulations in the regions that their product is sold. What this means is that a given product must meet the strict requirements of multiple countries and governing bodies. In some industries, the cost of compliance can be upwards of 35% of COGS and an even higher percentage of R&D costs. And, while the cost of compliance can be high, the cost of not complying can be even higher. A compliance failure can result in significant direct costs in the form of fines or litigation. All industries can benefit from a global traceability solution that helps reduce both risk and cost.
Those manufacturers that have invested in a global traceability solution gain significant advantage over those that lack this type of global visibility. For starters, elevating traceability to the enterprise level enables these manufacturers to measure product compliance consistently and in near real-time across their enterprise. Plant performance can be benchmarked and compared with minimal impact to plant level resources and systems. Furthermore, a single, global traceability repository enables pro-active monitoring which reduces both cost and risk.
Manufacturers that fail to upgrade their traceability across their supply chain expose their shareholders to undo risk. Planning for business continuity must include a solid plan for capturing a minimum of “one step forward, one step back” capability in order to ensure access to both developed and emerging market. Investing in “end to end” traceability may be one of the best ways to protect your brand, maintain existing business relationships or develop new ones, and ensure access to high-growth developing and emerging markets.