Playing a New Game

Aug. 14, 2009
How the toy industry banded together to ensure quality of offshore suppliers

A manufacturer's worst nightmare -- defective products posing harm. For two years (2007-2009) toy manufacturers recalled millions of toys from China due to lead paint.

Blame was laid on both design defects and suppliers in China not following standards on lead content.

But blame won't reassure consumers or protect brands so the industry went to work quickly. The Toy Industry Association (TIA), which represents over 500 manufacturers and toy importers who account for 85% of all toys distributed in North America, partnered with third-party accreditation body the American National Standards Institute to create the Toy Safety Certification Program.

"The TIA put together a group, which included toy companies, retailers, factory auditors and conformity assessment experts which met over a six-month period and was tasked with analyzing recall information along with the production supply chain," explains Elizabeth Borrelli, executive director, Toy Safety Certification Program, TIA. U.S. government bodies and industry representatives from China and the European Union were part of the process as well.

"We did get some push-back at first from factories as there was concern that our standard was yet another layer of compliance in addition to the new rules from the Consumer Product Safety Improvement Act. However education efforts were successful in explaining that this certification will actually help companies comply with the new rules," says Borrelli.

In fact, if retailers agree to accept the new seal of certification, then the standardization process is further simplified. To that end, Wal-Mart and Toys "R" Us sit on the oversight council of the TIA.

To meet the requirements of the program, manufacturers are responsible for:

  • Hazard and risk assessment for toy product design;
  • Factory process control audits by an independent audit body;
  • Production sample testing by an accredited laboratory to validate that the factory is producing toys that meet U.S. safety standards.

These three elements will be verified or audited by accredited certification bodies and upon successful completion the product will carry a TSCP-accredited Toy Safety Mark. The fees for the program are an annual $65 per SKU charge for testing certification paid to TIA. Other costs would be the design analysis piece, which would be underwritten by the manufacturer, as well as validation for ISO 9001.

Having kept an eye on supplier quality for the past 43 years, Arnie Rubin, CEO of Funrise Toy Corp., sees the new standards as the evolution of a process that has been working successfully for years. "Massive amounts of products have been coming out of China safely for years," he says. "As a supplier to OEMs, my company designs and tests products before we deliver to our customers. We have always made sure that our suppliers met our specifications. What has changed for the toy industry is the shift from a voluntary standard to a law via the new Consumer Product Safety Improvement Act."

Inez Tenenbaum, the new chairman of the U.S. Consumer Product Safety Commission, in a speech given at the Asia Pacific Economic Cooperation Conference on August 1 in Singapore, explained that the new Consumer Product Safety Improvement Act (CPSIA), passed in August 2008, resulted from the U.S. Congress looking at current production and supply chain practices and the level of conformity assurance for children's products and finding them lacking.

"This important child safety law creates a new paradigm for the creation of standards, regulations and conformance assurances," Tenenbaum says. "It creates a new system that requires change -- change by U.S. toy designers and importers and by foreign supply chain managers and testing lab operators."

Rubin says he's proud of the way his industry came together and views recalls as mechanisms of a process put in place to protect the public. "Recalls happen," he says. "The beef industry has had them and the auto industry has them all of the time. Changes are made and people continue to have confidence in the system."

And how do you ensure this confidence? One way is for companies to very carefully manage their risk when dealing with offshore suppliers. "Companies are trying to monitor tiers two, three and four with fewer resources in parts of the world that they are not used to doing business with," says Jim Lawton, senior vice president and general manager, D&B Supply Management Solutions.

Lawton's company is often asked by manufacturers to help collect information and act in the role of both setting and administering standards. His company has both large volumes of data available on suppliers as well as analytic tools to examine their database in order to help companies identify which suppliers might be at risk. He sees companies collaborating on setting standards for supplier performance and recognizing the value of sharing aggregated data on quality, delivery and service levels as a way to benchmark suppliers and provide a consistent measure for performance.

In the case of the toy industry, Philippe Tesler, CEO and co-founder of Enablon North America was brought in by TIA to provide the technology for certification. Tesler also sees the concept of group standards evolving. He points out that the Supplier Ethical Data Exchange is an example of how a group of suppliers in the UK found a way to collaborate on supply chain standards. One driving reason was to ease the burden on suppliers who were being audited multiple times.

"Multiple audits are very serious issues for suppliers," explains Tesler. When the toy industry wanted to standardize using a specific certification process, it was in fact a relief to suppliers to know that they could go through one audit instead of the many company-specific audits that they sometimes had to undergo."

Considering that many suppliers already need to be fairly transparent, especially if they are suppliers to Wal-Mart, it would seem that this information is already available. "While information is out there, it's not often shared," Tesler says. "But confidence in data sharing is growing and you can now see competitors joining the same platform. This is what the toy industry is doing."

Tesler also pointed out that soon consumers will require information -- be it safety, quality, environmental or ethical -- not only from companies but in fact for individual products. For example, consumers want to know the carbon footprint of their car model and not just that of the overall footprint of the car manufacturer.

Whether it's the carbon footprint or the issue of safety, manufacturers must incorporate these concepts early into the design function. "You can't test safety into a product," Rubin says. It must be designed that way with quality control for components and suppliers watched carefully."

Rubin offers this advice to other industries that might currently be looking into forming standards, instead of waiting until a crisis occurs: "Stay informed. Understand exactly what is going on in your supply chain. And keep an eye on any legislation or regulations that might be in the works. You don't want to be the last one on the block to know what's happening."

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