I often get asked which product categories are at the highest risk for causing harm to people and damage to an end-user’s brand. My regular answer applies a reasonable amount of common sense. It is fairly obvious that any products that appeal to children or those that go into or come in contact with our bodies carry more risk than other categories. This would prompt me to consider toys, food, personal care products and drinkware as categories you should be very concerned with who you are purchasing from and whether these categories are a true core competency for them. One caveat to this is that any product category is susceptible to social accountability issues and the resulting scandal from a Fortune 1000 company getting products that are manufactured in a factory that does not adhere to the UN Global Compact and violates human rights and child labor principles.
The more often I get this product category risk question, the more I am convinced that product category alone is not the proper way to identify your risk. It is certainly a major factor, but you can purchase a low-risk product from a high-risk supplier and find yourself in the same mess. You could also buy a high-risk product from a low-risk supplier and get hurt.
There are multiple factors that should be taken into consideration when determining your risk but one of the most critical is the question of core competency. Does the company I am purchasing from know anything about the product? Or are they just good at picking products at the Canton Fair while in China? Is the product category a core competency for them? Do they know where and who the product is actually being made by and to what standards? Do they have any transparency and control of their supply chain? Is there too much sourcing through trading companies who know a guy who can find a factory that can make it in China? After all, China doesn’t exactly have the best track record when it comes to food and personal care items.
Here is how this plays out in our industry. A company that is known for doing writing instruments expands their categories and adds mints, personal care items and drinkware to their product offering. They are following a proven path to growing their business. They can either sell more stuff to their existing customers or they can develop new products and win new customers, both of which are much more difficult and expensive to accomplish. Knowing this, the company adds new product categories to their offering and sells these new categories to their existing customers. They do not grow the overall industry volume through ingenuity or creativeness but they do carve into another supplier’s market share and further commoditize that product category.
Let’s take the antibacterial hand soaps that you are buying from your best writing instrument supplier as an example of why you might want to buy from a company who has this product as a core competency instead. Here are some of the questions a supplier should be asking before getting into this product category: Is this product a drug? Is it an over-the-counter drug? Is it a cosmetic? Is this a soap or hand wash? Are you making a medical claim and how does this impact the requirements and labeling? Where is the product made? Are there any restrictions in shipping the product via air if it contains alcohol? Shouldn’t you know these things before you start putting customer’s brands on the packaging? These are just a few of the questions that need to be asked. More can be found here in an ISSA document (PDF) that discusses the antibacterial hand soap regulations.
Adding new categories outside your core competency without taking the requisite steps to develop expertise above and beyond how to decorate the product is risky business for both you and your customers. Being good at bags does not automatically make you good at everything else. These different categories require different knowledge bases and skill sets, and the greater the risk the higher the premium is on how you are sourcing them. I touched on this in a previous blog on supply chains.
The good news is that some of the companies who have added these product categories are actually doing their homework. They have invested the time and resources into understanding the requirements for these new products and have developed a new supply chain to meet these requirements. Even better news is that every day distributors are becoming more adept at indentifying risk and valuing those suppliers who actually have core competencies. Something to think about as you walk the aisles and see all the new product offerings at the 2012 PPAI Expo Trade Show coming up in January.
Brent Stone is executive director – operations for the Quality Certification Alliance (QCA), the promotional products industry’s only independent, not-for-profit organization dedicated to helping companies provide safe products. A Six Sigma Black Belt, Stone has more than 25 years of in-depth supply chain management experience with extensive expertise in process design, development, improvement and management. He can be reached at [email protected] or visit www.qcalliance.org for more information.
