International Regulations and the Stranglehold on American Supply Chains


The dispute concerning chemical regulation rages on – Congress had its first hearing on the Safe Cosmetics Act.  The outcome of these hearings is that the FDA has decided against the regulation of bisphenol-A in food packaging.   So this leaves us with this question; what if anything will be done to update the thirty-six year old Toxic Substance Control Act. 


The reaction from environmental groups is one of regret.  They feel the opportunity to adopt and approve such legislation has come and gone.  Large scale reform by the United States Congress has been spoiled by bickering within the environmental health movement.  However, that does not mean that U. S. companies won’t have to endure regulations from the rest of the world.


With the European Unions’ Registration, Evaluation, Authorization and Restriction (REACH) any company that sells into the European Union now must avoid chemicals deemed toxic and comply with REACH.   It is not just European regulations that have American companies up in arms and rethinking their products.  The Canadian government voted to ban an antibacterial ingredient as toxic.  This could mean the end for antibacterial ingredients.   


The push to acquire loads of new data from suppliers is an arduous task.  However, some companies are seeing that once they get past the money, time and effort spent to build more robust tracking systems, can lead to product innovation and companywide savings. 


From 2007 to 2009 there has been an estimated rise of nearly 70% in regulations related to product and materials – RoHS, WEEE and REACH – adapted in different nations attacking the same issues.   Not only are those but regulations becoming stricter and stricter.   We are most assuredly reaching the point where companies will require a firm understanding of the chemicals and other substances which make up the products they which to sell. 


SAP has become a major player in this field.   Their software enables companies to track product composition and be in compliance with multiple regulations.   SAP accomplishes this by creating databases that are able to use the bill of materials (BOM), match them to know substances, analyze components and finished goods for compliance.   It is not an easy task or a cheap one but there are companies using the system to great results – time reduced to deal with regulatory issues is 60 to 70 percent.


This time savings translates directly to other areas of the supply chain.  Due to all parts and products being catalogued in a database a company’s time to change or revise engineering change orders has been reduced proportionately.   This effort leads to value engineering.  


At present most companies are dealing with the regulations as they arise.   Most companies are waiting for the day when all of this data gathering for compliance regulations will deliver a competitive advantage. 


In certain markets and with certain products there is a huge advantage to being able to sell your product as environmentally preferable.   Of course, you had better be sure no one can prove you wrong.


There is one area where a fir m needs to be careful in dealing with compliance and innovation – substituting a known toxic material with an alternative.  Unfortunately, substitutions happen all the time, whether companies realize or not that these substitutions can be just as dangerous or harmful.

Some examples are:


  1. Replacing lead in gas with MTBE.  This was replacing an airborne carcinogen with an aquatic toxin.
  2. Electronics industry in Europe was forced to get rid of lead in solder but its replacement – tin-silver-copper – was not environmentally an improvement.
  3. The pesticide industry is full of these stories.  Too many to go into details now.


Too often, these regulations are put into place without due diligence of checking their replacements.  If you don’t make researching the substitutions part of the regulation then this is what will happen.