Rapid economic globalization has created an increasingly complex regulatory landscape for businesses. While the chemical industry today is far more mature and better informed about regulations and how to comply with them than in the past, companies still must invest heavily to make sure they are operating within these ever-evolving requirements. Recent developments, including heightened product tracking and tracing in the transport process, require chemical companies to rethink approaches to address this “new normal.” Firms must comply with internal and external edicts to prevent chemicals from falling into the wrong hands. Companies must treat safety as the top priority, includingwhen it comes to global trade. Chemical companies need to address three critical areas of safety/regulatory compliance: REACH (Registration, Evaluation and Authorization of Chemicals)regulation, CFATS (Chemical Facility Anti-Terrorism Standards), and Governance, Risk and Compliance.
REACH
This European Union (EU) regulation addresses the production and use of chemical substances. The overall objective of REACH is to ensure that chemicals, either of a specific ingredient or potentially dangerous to the health of humans and the environment, are tracked and properly registered. If products aren’t recorded correctly, they should not and will not make it to the shelf for sale/distribution (“no data, no market”).
A complex scenario within REACH pertains to an organization that sells a product across intercontinental boundaries (example: a productsold in Asia that first must pass through Europe).If the chemical’s volume exceeds a particular threshold, the product is subject to REACH. Such scenarios have prompted increased regulatory compliance as well as environmental and sustainability initiatives that you hear about today. To meet these specific guidelines and minimize the total cost of compliance surrounding programs such as REACH, companies need an integrated enterprise resource planning (ERP)system to manage this complex situation.
Another challenge posed by REACH is avoiding duplication of efforts; once a chemical has been registered with the EU, a material shouldn’t need to be registered repeatedly. How can a company piggyback on others’ data required for the registration process and handle specific requirements? How can organizations throughout the industry better collaborate to efficiently navigate the process? REACH legislation permits companies to form substance information exchange forums, so they can submit a single dossier for registration of a particular material.
The registration burden within REACH can be tackled through software systems that focus on a compliance workbench to help companies execute various predefined compliance checks and integrate with governmental databases that handle the registration process. These capabilities help organizations meet requirements internally, collaborate externally, and track to ensure that everything is properly registered. Furthermore, integration of the registration process allows an organization to incorporate it with other operational processes (sales, manufacturing, quality, etc.).
CFATS
The security of chemicals and the facilities that manufacture or handle them has become an issue of profound concern. In response, the U.S. enacted CFATS as a way to provide adequate security at “high risk” chemical facilities such as chemical plants, refineries, power plants and even universities in some cases. How can a company ensure the products in its chemical facilities are secure and the sites satisfy specific anti-terrorism requirements? How can it track and protect a facility from dangerous exposure? What must the firm do in case of evacuation or compromising action?
Again, it comes down to an integrated ERP system to ensure an organization has the documentation and necessary information to handle those specific aspects. Standards continue to evolve and when it comes to ones like CFATS, there’s no room for mistakes. Companies need an integrated solution and internal investment to meet facility security requirements.
GOVERNANCE, RISK MANAGEMENT AND COMPLIANCE
Global product transportation and product information management require software systems in the area of global trade services and governance, risk and compliance. Included in this discussion are the safety of people and facilities, providing the assurance products are distributed to the proper end location, and documenting a sound and responsible supply chain environment. A chemical company today must be able to track the distribution of products it sells to customers. The firm must specifically know the identity of their consumer and, beyond that, ensure a product isn’t getting to a denied party. A recent development in the area of product distribution is the notion of knowing your “customer’s customer.” How can we identify this information and how can this information be tracked so that organizational risk management (inclusive of organizational brand risk) is minimized?
The knowledge of product movement is crucial and it’s a major element ofa global trade, governance and stewardship commitment. A company can face severe penalties/damages if its material ends up with customers on a denied parties list or in a country with which trade is forbidden.
So how can a company prevent its products from ending up in the wrong hands? With global trade initiatives being the norm for businesses, companies must proactively promote proper handling and tracking. This monitoring can be especially complicated for some firms, though, because they may have exemptions to ship to restricted countries if products are for health or humanitarian needs. Organizations facing these challenges are encouraged to utilize software systems to accomplish tracking and tracing, minimize cost, integrate global trade constructs into the organization’s overall supply chain process, and maintain 100% compliance.
Integrated, comprehensive systems enable organizations to better coordinate production, packaging and pricing across the entire enterprise. As a result, they can match planning with execution while maximizing internal resources and complying with government regulations. They help companies to reduce cost of inventory, improve cycle time and enhance visibility in the supply chain — and, thus, to continue to thrive in a global economy.
THE RETURN ON INVESTMENT
To optimize the supply chain, a holistic, integrated software system truly can serve as a key tool to drive profit and return on investment. Sure, a company can operate without such an integrated system but it risks errors and omissions that may impact performance and profitability.
Chemical companies continue to make great strides in staying compliant and increasing their visibility across the industry. However, they still largely take are active approach. They are missing an important opportunity. Instead of merely responding to compliance standards, firms must become more proactive. When learning of regulations that will roll out within the coming months or years, a company must take advantage of that not only to prepare for compliance but also to identify possible opportunities. After all, this head start can enable the firm to maximize the benefits achieved from its spending on compliance. Organizations can use ERP systems to help tackle those opportunities in advance.
A plan for continuous improvement will give chemical companies a better shot at managing assets. They must think big on the innovation side and deliberately factor compliance issues into their vision of new products and offerings. Compliance, which often has been treated as a barrier or after-thought in the development process, really can spur innovation to bring new products to market. Success depends upon managing the product development process while being mindful of potential regulatory requirements that must be addressed immediately or in the future. Integrated software systems allow an organization to have the visibility and flexibility to manage innovation and compliance processes effectively.
For any chemical company looking to ensure that compliance is achieved in a way that doesn’t radically affect the cost of doing business, key areas to consider include:
• inventory and track-and-trace;
• quality management;
• recipe development and product manufacturing processes;
• innovation and new product development initiatives;
• product stewardship;
• utilizing information as an asset to drive profitability;
• business intelligence; and
• mobility and access of information on mobile devices.
Today’s business challenges and opportunities in the chemical industry have moved beyond traditional norms. Products and processes continue to evolve, driven in large part by changes in global forces. Tackling issues of compliance ahead of time can open up opportunities for innovation in the development of new products and services. Companies must make certain they have the knowledge and resources to keep the production and distribution of chemicals, and those at both receiving ends, as safe as possible. Operating with foresight, with a system containing the foundations for tracking product compliance, and with complete visibility and transparency to critical information will enable an enterprise to realize continued success in a challenging and competitive marketplace.
BRIAN EVERETT is industry solution principal for itelligence, Cincinnati. E-mail him at [email protected].
