Sourcing Safe Products - Webinar

Summary: A series of presentations from the ACCC and industry experts on responsible sourcing of safe products: how to do it, why you should and what happens if you don’t.

Published: 26 May 2015

Ruth Mackay: Good afternoon everybody and welcome to the ACCC presentation on safe sourcing and to begin with, I'd like to introduce Delia Rickard, the Deputy Chair of the ACCC.

Delia Rickard: Hello.

Welcome to the ACCC's webinar on sourcing safe products.  I'm Delia Rickard, Deputy Chair of the ACCC.  We realise that it's a competitive marketplace.  Sourcing goods from countries with low production costs provides benefits.  We appreciate that, however, cheaper products should never come at the expense of consumer safety.  We're extremely concerned about quality assurance processes with products that enter the Australian market.  We're concerned that some processes may be inadequate, causing injuries to consumers.  From a business perspective, it makes sense to pay close attention to stewardship and the integrity of your supply chain.  Where quality is variable or deteriorates, good may become unsafe and this could expose you to the costs of recalls and possibly legal action, not to mention reputational damage.  Today's webinar is about being proactive.  It's about managing the safety of the goods you procure or supply.  We'll focus on your responsibilities and the steps you could take to ensure the goods you source are safe.  In doing so, we'll take a dual perspective.  The ACCC is the national agency responsible for the safety of consumer products.  Ruth Mackay, our General Manager of Product Safety, Strategy, Policy and Engagement, will explain your obligations under the Australian consumer law.  She will also talk about what can happen if you don't source safe products.  We'll also get an industry view.  We have several guest speakers with experience on the ground and we're so pleased that they're willing to share their valuable experience in this area.  They will cover practical things such as developing and putting in place product guidelines, having quality assurance processes when sourcing across countries and dealing with overseas suppliers and testing requirements.  Before I hand over, I want to say that it doesn't matter where you sit in the supply chain, product safety is a shared responsibility.  So thank you for taking an interest and playing your part and I hope you find today's webinar of value.

Thank you.

Ruth Mackay: Good afternoon everybody and welcome to the ACCC webinar on on sourcing safe products.  My name is Ruth Mackay and I'm the General Manager of Strategy, Policy and Engagement with the Product Safety Branch within the ACCC and today I am delighted to welcome three experts from industry who will give us some presentations to assist all of our understanding in terms of sourcing safe products.  We have Daran Ponton from the National Retailer Association with us.  He will be discussing product safety guidelines.  Following Daran, we have John McCosker from Quality Control Dynamics.  Daran has over 45 years in the textile and apparel industries and he is going to discuss product quality and compliance processes.  And finally today, we'll have Ian Anderson, who has extensive experience in the toy industry and who will discuss managing overseas suppliers.  At the end of these presentations we're going to have twenty minutes to allow for some time for questions and answers.  So I understand that you've got an 'ask a question' button on your screen, on the right hand side.  If you click on that you will be able to type in a question for us.  It would be helpful if you could tell us where you're from and we'll then answer those questions at the end of the session.  This whole webinar is going to be published on our website within the next three days, so it can be watched at any time later.

To begin with, however, I'd like to provide just a little bit of background on the ACCC and our role in relation to product safety and the sourcing of safe products.  The ACCC is the national agency responsible for product safety.  Broadly, it's our job to recommend where product safety regulation is required and to enforce and encourage compliance with the laws and increased consumer awareness about the hazards.  We have a number of specific functions within that.  So we are the organisation that receives mandatory reports of serious injury or death, we manage recall notifications and we provide a lot of guidance to industry in relation to recalls, and we hear a range of information from other intelligence to take appropriate action.  We provide guidance, advice and assistance in relation to our functions and we recommend to the Minister for Consumer Affairs when product safety regulation or action is required.  The Minister for Small Business I meant to say, I'm sorry.  We encourage compliance with product safety laws and we provide supplier and consumer education.  Now, what's the issue?  We have been looking at the data that I've just mentioned we receive, and noticing some industry trends that we're a little concerned about, or quite concerned about.  In particular, we're noticing that there's a greater reliance on direct sourcing of low cost, fast moving consumer goods and there appears to be cost cutting in product design and purchasing processes, and the concern is that this is going to lead to an increased supply of unsafe goods on the market, an increase in consumer injuries and to a growth in the number of recalls that need to take place.  We're very concerned that there are quite a number of suppliers, including some very major retailers, who are in fact supplying unsafe products and often the reason for this appears to be that there are unsatisfactory processes in place and they're failing to ensure the safety of the products that are being sold to the Australian market.

Our chairman, Rod Sims, has spoken on the importance of safe sourcing in a number of times.  In particular, he began speaking about this in late 2013 at an ICPHSO conference, which was held in Australia.  He has also very much focussed on it recently when he was launching the ACCC's Compliance and Enforcement Policy at the Committee for Economic Development of Australia in February 2015.  Here he reiterated the importance of good practice when manufacturing, sourcing and managing quality assurance of consumer products.  Suppliers do have an obligation to supply safe products and consumers have rights, including the right to claim for losses, and the ACCC can take action against suppliers, and we are taking action against suppliers who are supplying unsafe goods.  I want to make clear though that the ACCC isn't an expert on safe sourcing.  We are trying to assist industry to supply source – to source safe products by bringing together experts and by fostering a conversation about safe sourcing, and in just a moment I've also got some tips that we, here, commonly – are commonly used in industry at the moment in terms of ensuring the procuring of safe products.  So for that reason, as I say, we're particularly pleased to have with us today three industry experts who really are able to provide great insight into the issue and we're very, very appreciative of that.

So what can I do as a supplier?  Importantly, you need to put in place processes to ensure that goods are safe.  To do this, make sure that you're seeking information about how quality is assured.  You can be receiving test reports, hopefully current test reports, not very, very old test reports.  Undertaking factory audits is another very important part of the process of ensuring that products are safe.  You can ensure that materials are tested, that assembly line processes are well-known and documented and are in place.  Quality checks are another important thing, and one that I particularly want to emphasise actually, and we'll speak a little more about in a moment, is the importance of pre-shipment inspections, making sure that they're carried out with adequate supervision by qualified staff appointed by the retailer to take on that responsibility.  And finally, staff training is a very important way that you can make sure that products that are being delivered to you and to Australians are safe.  Just a little bit more on test reports, it's important that you request test reports from a manufacturer, wholesaler or agent to an applicable safety standard whenever you purchase goods domestically or from overseas.  You can commission your own testing and it's a good idea to do that where it's possible and make sure that that's performed by a suitably accredited laboratory.  Most goods can be tested to an Australian standard and some of these are cited in product safety regulations.

In the past, the ACCC has provided information to assist you with testing products, so you can see on the screen at the moment that we have a publication, 'Product Safety, A Guide to Testing', and we also have a webinar which focussed on product testing, and they're available on our website at the moment to assist you in that particular area.  Some further tips in relation to testing; check whether or not the factory or agent has a preferred testing laboratory.  When you do this, you need to be careful that the supplier who tries to steer you in the direction of their own test house isn't a closed relationship.  So you need to feel confident that you're going to get an accurate testing rather than testing that's been arranged between the test house and the supplier of your products.  Check whether or not the factory has accreditation from a recognised body, such as in Australia, NATA.  Check when samples will be available for testing and check who is going to be supplying those samples.  It's very good to have an independent person obtaining the samples and supplying them for testing rather than a single test being, or a product being supplied by the manufacturer of the goods.  In terms of pre-shipment inspections, request a pre-shipment inspection to be performed at the factory before the goods are released for shipment.  Make sure you choose a pre-shipment inspection service provider that offers a reliable service, that's also cost effective.  In fact, inspections usually cost no more than a couple of hundred dollars.  Check that your pre-shipment inspector is trained to carry out tests and measurements for your products.  Confirm that the service provider – with a service provider that their inspections are carried out in accordance with well-established international standards and, importantly, make sure that you understand the information in the inspection report and clarify anything that seems to be unclear.  You could consider developing a customised inspection protocol and when you have identified issues, make sure that these have been completely addressed prior to the shipment of the goods.  Some other compliance measures that you can put in place is developing documented quality assurance and control processes, performing random stock audits in distribution centres or stores, commissioning factory audits in relation to compliance with ISO 9000 or its equivalent, develop and train staff in quality assurance processes, mandatory safety standards and in the Australian consumer law and it's a very good idea to purchase recall insurance and engage the services of a professional quality assurance consultant.

Now, I mentioned earlier some of the resources that the ACCC has available.  We have recently developed a special part on our website devoted to the safe sourcing of products, so that's on  If you look there, you'll find the product safety testing guide and the webcast that I mentioned earlier.  There are also product safety recall guidelines available on our recalls website.  That's very important if you do find that you've discovered a safety concern.  Have a look at those guidelines and also talk to our staff who will be very happy to help you through that process of considering whether and how to recall goods.  And finally, I just wanted to draw attention to the fact that there is guidance from ISO available that's very, very good, consumer product safety, guidelines for supplies and consumer product recall guidelines for suppliers, so you'll find those things, or links to those things on the website that I mentioned earlier.

So now it's time to hear from the first of our expert speakers, Daran Ponton.  Daran is the Quality Assurance Manager from Kmart in Australia.  He has been with Kmart for almost two years, having spent the previous eighteen years as the Quality Manager at Myer.  During his time as manager over these years, Daran has been involved in a diverse range of company, industry and regulator developments.  Most recently, Daran was an active participant in the newly released Australian standard for children's nightwear.  Daran is part of the National Retailers Association Technical Standards Committee.  Daran is in fact representing the National Retailers Association today.  The Technical Standards Committee consists of quality professionals from most of the major Australian retailers.  The committee meets twice annually to discuss product safety standards and regulations.  Daran will present a body of work that has taken over three years of effort to reach its final stages, product safety guidelines for children's apparel and accessories.  Thank you.

Daran Ponton: Thank you, Ruth, and good afternoon to everybody.  Thanks for the introduction.

As Ruth mentioned, I'll be talking about children's apparel and accessories product safety guidelines.  I'm going to talk about the process we've been through to develop some industry guidelines, a little bit different from – there were some mentions of Australian standards and international standards that Ruth made.  Sometimes we don't have international standards or Australian standards, but we recognise there's a need for some guidelines or for guidance for people working with products or sourcing products or developing products and we recognise there was a bit of an opportunity here.  Now, I'll talk through the process of developing these industry guidelines.  Collaboration is key.  I say that because there's a point of time the ACCC and the Retailers Association were in some discussions saying, "We think there's a little bit of a gap, we think we can do better with safety for children's products.  We might have toys covered through an international standard or Australian standard and we've got some other elements of nursery products that might be covered," but in terms of the children's apparel and accessories, we thought there was a bit of gap there and after some discussion with the ACCC we were saying which direction should we go?  The Retailers Association said, "No, we should take this up as an industry challenge, it's an industry exercise to develop some standards and some guidelines."

As Ruth mentioned, there's within the Retailers Association, the National Retailers Association, there is a Technical Standards Committee.  It's a great committee of representation from a number of the retailers that are up there, and many more.  So apologies to those retailers that I haven't listed today, but there are many more, and we recognised there was a great opportunity to tap into the talent and the knowledge and the wisdom that sat within all of those retailers and to bring that together to create this industry guide around safety.  I guess in the past, based on all of the individual retailers' experiences, the good and the bad, what we tend to do is then develop internal standards that we use to drive and steer our product safety decisions, so we thought there was a great opportunity to bring all of that wisdom together, that collective wisdom to develop some guidelines.  We also just didn't want to do that on our own.  We recognised that there are some other industry associations – I mention there the TFIA, INPAA, which was nursery products that developed a product safety framework, Standards Australia and international standards were other areas we looked to from a collaboration perspective to say let's draw the collective wisdom of all of these different players together to help us create some safety guidelines.  A three year process, it really was a three process from beginning to end.  I think we spent really a year as a group of retailers coming together saying, "Yes, we know we should do something," but it was a pretty stormy sort of a process at that time.  It took a long time for it to actually become more of a tangible thing that we knew what we were going to do, so the first twelve months we shared our standards, we pulled them together into one document and there are often very conflicting pieces of information in there because we've had different experiences and we've taken different directions in terms of how we might manage those from a product safety perspective.  Year two, we started to say - we recognised that we couldn't just create product specific standards.  We actually needed something that was more of a risk assessment model.  We want people to think safety and understand safety and challenge themselves to think about safety and if we do that we'll have a better overall outcome than trying to give really specific instructions on buttons, how you might treat all the buttons or the different product features that you might have.  We also spent a fair bit of time in that second year saying, well, defining for ourselves that we had to understand the hazards, and then once we understood what the hazards were then we – in the third year we said, "Gee, we've got the theory nailed.  We understand what the theory is after two years, now how do we translate that into something more practical, something that people can use to make safe product decisions?"  So we created a whole series of risk assessment worksheets and these are the things that we'd like, what I'd call risk practitioners, the people who do it every day, but also people who aren't usually involved in assessing products for safety, they can use these worksheets to steer them through the course of looking for what are the key hazards and then what should we be doing to assess those hazards and make good decisions and this is mostly about building safety into the product from the very beginning, not trying to address it after it's already off track, it's about making good decisions from the start.  So we had some development hurdles.  I mentioned multiple retailers, we had different ideas, so that took a while to overcome.  Probably like with many, many standards organisations – committees, sorry, for those who a part of them, everyone is enthusiastic, everyone is committed, but we've still got our day job so it takes a while to work through – you know, we're doing it on a voluntary basis and we're chipping away as we can.  There was a little bit of a geographical challenge, you know, we've got Sydney and Melbourne predominantly that there are almost two factions.  Faction sounds like we're competing against each other, it wasn't like that, but we're just geographically separated and the biggest challenge was definitely – you know, once we had the theory nailed just saying, well, how do we make it more practical?  I'm just going to talk through that a little bit because it's very easy for people to throw up just do a risk assessment, and I think we'd all go, well, what does that – what do I really need to do now?  So we thought we needed to make it much more practical.  We created the document, we've been through the implementation phase.  I'd say it's still really in its implementation phases, we're still adopting the new document, because a document has been launched, it has been published.  The risk assessment principles we've been, say, broadly adopted I would say for those who are close to the document, the adoption though is obviously optional.  It's not a mandatory standard.  It's not something the ACCC says, "Here you go, this is the standard and you must comply with it," but we'd love to see greater adoption across the industry and we really want to see that, you know, it's developed as a retailer document and it's been through the major retailers, but there's a bigger opportunity for so many more retailers out there, so many more importers to draw on the knowledge that's contained within this document that we've created.  Hazard identification, the main things that we focussed on was choking hazards, obviously, sharp edges - I think some of our other speakers might talk to some of these points – strangulation and entrapment, really tricky one, chemical toxicity.  You know, it's been in the recall spotlight, I'd say, some things around azo dyes and there's an impact statement out there at the moment for azo dyes, and we talked about some other less risky hazards, but they do present in packaging perhaps, some hazards, or in some novelty items that can be engineered into product now, button cell batteries that might be in product.  A little bit hard for you to see that screen perhaps.  When we said we needed to take the theory and turn it into something practical, we said for those people not involved with product, they'd probably look at a garment, for example, and say, "It's got buttons on it," so we thought that the risk assessment worksheet had to be very much feature driven.  It's got zips on it so I need to be guided by zips.  That's the approach we've taken, so the document contains coverage of all of these different product features.  Now, we don't have time to drive down into the document itself today, but I do recommend that you take some time.  You'll find the document loaded on the National Retailers Association website and if you search for 'children' you'll find there's a link to technical standards and you'll be able to find your way to the document.  I hope you find it useful and practical.  Thank you very much.

Ruth Mackay: Well, thank you very much, Daran, for that and we'll move straight on to our next presenter, John McCosker, who is the founder of Quality Control Dynamics.  This is a small team of highly skilled industry professionals who specialise in both technical and quality compliance consultancy project support throughout the textile and soft goods industries.  John has worked in the textile and apparel industries for over 45 years covering machinery maintenance, formal technical teaching, quality control, quality assurance management and most recently, the bringing together of his specialist associates into the Quality Control Dynamics consultancy.  He has in-depth experience in international retail sourcing, inclusive of quality assurance and compliance programs within Australia, China and South Africa, the EU, Bangladesh and Vietnam, whilst leading successful projects in these locations and the Middle East.  John is a fellow of the Textile Institute of the UK and is an internationally chartered and certified professional in the textile, clothing and quality management arenas.  Thanks, John.

John McCosker: Thank you, Ruth, thank you, Daran, and greetings and thank you for having me here today.  There will be clearly some overlap in some of our topics today.  I've tried to keep mine as generic as possible, but excuse my movement back into the textile and clothing areas, which is my fundamental base, as we go along.

Today I wanted to talk about product quality and I include in that discussion, obviously, product safety.  Okay, when we talk about product quality and product safety I think where we've got to look at is what the product requirements are.  We need to really define what our product requirements are, we need to communicate those requirements with our teams, with our partners, with our internal teams and our external teams, we need to assess and then monitor compliance to those.  Today I will focus on quality compliance and assurance, but social and ethical compliance is a direct operational independent part of any successful – of compliance and quality assurance program.  Quality assurance programs can be simple or they can be complex.  I prefer the simple, and I will set out a relatively simple, and to some, obvious set of operational headings and points.  I, unfortunately, can report consistently through my journey that I find too many programs lacking in scope and operational effectiveness, perhaps sometimes, commitment.  The causes for this are many and varied, but quite often the consequences are serious and confronting, especially when we consider the potential for dangerous product safety outcomes, and I will show some of these later.  Like it or not, compliance is a cost additive process function in both terms of dollar cost and sourcing times.  We would hope in a focussed and professionally and committed development program undertaken in conjunction with our supply chain partners there will be a plateau point where increases in productivity and reductions in reworking and reprocessing will almost balance the associated compliance costs, but there is no Nirvana to be reached.  In a cost down culture, senior management, business owners and those who sit on the boards of our major companies must work to ensure that their businesses focus on progressive supply chain partnerships that develop and maintain assurance programs that ensure consumers are able to purchase fit for purpose quality products that inherently assure best possible safety attributes and performance.  Cost versus quality, cost versus compliance, cost versus product safety, who wins, who loses.  Our first heading, really, we have to define the product attributes and requirements.

Firstly, we really should know – we should know ourselves what they are and we should understand them.  If we look on the left hand side we see performance.  I have gone back to the apparel days and I've listed their performance and fabrics components and product, but they can be any attributes of any industry.  I ask the questions of that, what are your customers' requirements, do you know them, do your requirements, do your supply chain reflect those customer requirements?  We need to meet those specifications.  Those specifications can be both performance and test specifications.  Going down, if we look at safety, safety in design, hazardous substances, fabric accessories and presentation.  Do we know and understand the mandatory and marketplace requirements for those?  We need to support those compliance regulations and specifications, supported by national and international requirements, test specifications and requirements.  Moving down to product, which is obviously dependent upon the previous two.  We need specifications, size and manufacturing specifications, packing specifications, inspection specifications and a term which we call DCLs, or defects classification lists which must be present for effective final inspection to happen.

Our second heading, or second point is one which I see quite often not working well.  We have to communicate, communicate and communicate, internally and externally with our customer and supply chain partners.  We have to communicate product specifications, we have to communicate product dimensions, most important in children's nightwear and issues of entrapment, we have to communicate fabric product knowledge, test and performance requirements, we have to communicate product ingredients, the presence of azos, formaldehydes, harmful substances and these need to be supported in any industry by testing programs and supply chain compliance programs, including the Oeko-tex 100 for the apparel and textile industries.  If we do these things, then we begin to have what I've put down the bottom, quality partnerships.  Our third general heading is we need to constantly assess and monitor our compliance.  We need to measure, quantify and qualify to be successful.  We need to assess at the beginning, not at the end when the crisis has happened, when the roof is falling down, we need to assess at the beginning our product.  We need to ask ourselves can the product and its components meet the performance requirements set?  Sometimes the answer is no, and what do we do in that case?  Do we exit the product or do we modify the product or do we turn a blind eye to the standards?  Our supply base, we need to check and investigate our supply base.  Do they have the resources, the ability, the competence, the systems and procedures and the commitment to produce, control, monitor and assess the product to define requirements?  We need to do this through audits, surveys, reviews, commitment and certification.  If we don't, what can happen?  We see here an issue with product safety.  The outcome of this is a bad potential outcome.  Is this a manufacturing problem or is this a product problem or is this a compliance systems problem?  We're here, see the sharp end protrusion on a zipper for a child.  Is this a product problem, a compliance systems failure problem or what?  The outcome, a child, as you can see here, scratched.  The outcome could have been much worse than we see here.  The next one, and the potential outcome for this, zipper disengaging from the zipper slider, could have been catastrophic.  Again, was this a product or a compliance system problem?  The possibility of any of what you've seen before can cause serious injury, even death, to infants and small babies.  It cannot be ignored by any of us in this room or any of the audience today.

You've asked previously what your supply base has, and now you need to ask yourselves how are you going to assess and monitor compliance?  Internal, you've got to look inwards into your own business.  Does your organisation have, or company have the resources, the ability, the competence, the systems, procedures, commitment and knowledge to communicate, manage and ensure compliance to the defined requirements?  If you don't, go out and get them.  Then you've got to look externally in the country and the territory you source and maintain.  Are there reliable and certified compliance service providers in place to support both supply base and internal compliance assessment requirements, are there certified testing and inspection companies present, are there clear operational and contractual requirements in place, are there reporting and corrective action plans operating, is there a continual assessment and improvement development plan operating?  And finally today, we have the customer and the client.  Agreements need to be put in place for performance requirements, assessment, monitoring and reporting of compliance, non-compliance reporting, corrective action and product improvement processes and performance assessment programs.  If we do not do these, then our efforts previously will bear no fruit.  They are the most important elements of a plan.

I want to thank you for your time and I hope that I've given you some points for contemplation and perhaps inspiration going forward.  Thank you very much.

Ruth Mackay: And thank you very much, John.  And as before we'll keep going straight on to our next speaker who is Ian Anderson, the Vice President of Operations – formerly the Vice President of Operations, Asia ICTI CARE process.  Ian Anderson has extensive experience in the toy industry working for a number of international companies like Mattel, Amcor and Fisher Price.  Also prior to his retirement, he was Acting Operations Director for the Asia ICTI CARE program focussed on social compliance in toy manufacturing facilities across Asia, predominantly China.  Internationally, he was appointed by the Toy Industry Association, the American Toy Association to establish ICTI Code of Conduct Office in Hong Kong to perform audits and training.  During his time in the toy industry, Ian represented the Australian toy industry locally with Standards Australia serving on several committees over a period of thirty years.  He also represented Australia on the ISO Toy Safety Committee working groups.  Ian has been an active board member of the Australian Toy Association for twenty-five years and in 2004 he was inducted into the Australian Toy Association Hall of Fame for his services to the toy industry safety programs.  Ian?

Ian Anderson: Thank you, Ruth, and good afternoon to you all.  My approach to this is a little different and I start off in the beginning, check if the factory is registered for the type of operations you will require.  In many parts of the world, and especially in China, there are differences in what the factory is actually registered to do.

Is there a current social compliance program certificate, and if so, which one, who supplied the certificate, how active are those people and how good is the actual compliance by the factory.  A factory with a current certificate has the following benefits.  Knowledge that you are conducting business with a company who is behaving ethically, there's less likelihood of exhausting or [inaudible] workers by excessive working hours, workers are paid a legal wage at least, reduced worker injuries, increased loyalty to the firm diminishes mistakes in production and it improves product safety.  Now this has been adequately illustrated at various times.  Question: why is there no social compliance program? That's the question you should be asking your supplier.  Many majors, including Walmart, will not accept product if no certification exists.  It's a clause in their contract, you provide a certification certificate number and you've got an order, otherwise you haven't and some companies actually have accepted orders on the understanding that they were going to be approved and eventually have not been and have been caught and stuck with the product because Walmart simply won't take it.  The same applies to many other major retailers including some in Australia.  Does the factory have industrial harmony?  That's obviously important because if it doesn't then you have close downs and you're not going to get your product at all.  What is the staff worker turnover rate and as we discussed earlier this morning, this is the end of after Golden Week when workers are returning to factories and many cases the return of factories is less than forty per cent of their workforce.  They then have to recruit new staff and retrain.  The conciseness and transparency of what you're asking the supplier to do is most important.  It has to be in an unequivocal language.  If you're not sure that they understand, ask, ask and ask again.  As John said earlier, communicate.  Do it in clear and concise messaging.  Try wherever possible to put it in print so as that they can refer back to it.  Unencumbered instructions, omit irrelevant comments.  You should try and use – in most cases you should use an agent.  Choose one who knows the relevant product market, has an appreciation of the local culture and check references.  Factories in China, recently, have had instances where they have had an issue as regards the local culture.  They've had differences in the religion of the people working in the factory and they've eventually had to establish a second factory to take away the clashes that came about and this is some of the necessary steps you need to follow is examine samples of the products produced.  That's prior to your placing an order.  You have a look at what they're currently producing.  Inspect the factory if you possibly can and scrutinise their production processes taking a great deal of notice of where they put their checks and balances and who actually does review the factory's product.  You review the factory's capacity to produce.  I've seen factories where they have a hundred and fifty employees and they've taken on a contract to produce something which they'd need five hundred employees to do, so they farm it out to other factories.  They won't refuse the order if they can avoid it, but they will move it out and as soon as they do, you've lost control of what you've got or what you're going to get.  Examine their scheduling to make sure that it does make sense.

Testing, Ruth touched on this earlier.  Does the factory or agent have a preferred testing laboratory?  My first impression of this is always to be suspicious if they have.  I've worked with companies that have had long term arrangements with testing houses.  Now, I'm not saying that testing houses per se are bad, because they're not.  I worked for one for nearly ten years, but make sure that the test house has an accreditation from a recognised body.  The choice of samples for testing and the responsibility for the test is to be required.  The full suite of tests on some products are not necessary.  I know that can go counter to what other people have said, but if you look at the product there are things which are obvious.  Like for instance if a product doesn't have any surface coating, there is no point in testing it for surface coating, so that you would have found in the old days that test laboratories were inclined to test or tick the boxes and charge you for doing those tests.  If possible, try to get references on the factories.  It's not always the [inaudible] an Asian business environment because unless they're really rivals in the same area, they're loathe to speak badly about other companies.  There is a very strong relationship between all sorts of factories and you'll very often find that you go to three factories and they're owned by various members of the same family.  The best thing there is to check with other business and trusted sources and the advice you get will most often be verbal.  You will find people reluctant to put anything in writing.  When you're approaching the factory and getting your work from them try not to oversell.  Be truthful on the potential of the business that you're offering to them.  If you think you've got a potential to reach X number of pieces in a year or three months or six weeks, whatever it is, don't say that you expect to be able to do – and inflate the quantity by eight or ten times because the factory will immediately try to find a way of being able to cope with that increased business long before it eventuates and very often it does not and the factory is left with some very costly mistakes.  Reserve your judgment.  Don't jump to judgments very quickly.  Make sure you know all the facts before you pass judgment.  Cultural differences.  I mentioned before about a factory having to build a complete new facility because of a difference in religion.  You also have factories that have to do two separate dining halls because of the dietary issues.  Some factories, and one in particular I know in Indonesia, they run two separate bus services to deliver labour to the factory and it's all to do with the culture.  Difference is not always wrong, it just needs to be understood.  Avoid confrontation without surrendering your authority.  Warning size, excuses.  In the lead up to certain steps in the process, for example the receipt of initial samples, the availability of test reports and final inspection reports.  Avoid the temptation for shortcuts on testing and inspections.  One of the excuses is stalling, a strategy which is used to induce you to accept less due to pressure of delivery schedules.  The development and risk management strategy for what you will do when you find someone who is stalling.  They stall because they have an issue and a problem.  So try and overcome that and make sure that you get the agent, if you have employed one, to push to get the samples to your test house in an appropriate manner.  And as we've covered a couple of areas here, establish relationships.  There's nothing better than having a good working relationship with your supplier and deal with, wherever possible with the owner or the senior partner of the business.  Establish relationships at various levels where you can and maintain those relationships long term where possible.  Business relationships based on mutual trust are essential in Asia.

Recommendation.  The establishment of good relations is paramount.  Be open wherever possible, be firm, do not accept assurances that it will be fixed.  Show that you want to be a partner.  Always ask for test certificates and insist that you do get them.  Test certificates that are more than twelve months old are a waste of time and are usually not accepted by the customer.  Where possible discuss your results with the tech people.  Be open to discuss issues and problems at all times.  No-one knows all of the issues, so listen to people and then you might have more sort of chance of getting it as you expect.  Show and expect mutual respect.  One thing that I haven't got on the thing there is avoid making late decisions.  You will be asked to make a quick decision at times when it's expedient for the factory.  Try not to do it, try not to allow yourself to be in a position to have to do it and from there on, all I can say is good luck.  Thank you very much and I'll pass you back to Ruth.

Ruth Mackay: Okay.  Well, thank you very much, Ian, and again to John and to Daran as well.  It's really valuable to get the industry insights that you have been sharing with us today, but we'll move quickly now to questions.  We had Michael Tersero asking, I think particularly for Ian, any ideas what to do when you get conflicting test reports from two different testing labs?

Ian Anderson: It depends on how they conflict, Ruth, because recently there were some tests carried out using ten different testing laboratories in regard to the levels of lead which you would expect to be pretty straight forward and obvious.  It depends entirely on how the sample is received.  Sometimes you will get what is called a golden sample and it's quite different to the ones that someone else will get.  You can be sure that that's the best of the samples, but then the actual way in which the samples are tested is also can vary.  You have electronic testing of surface coatings and that has got quite a margin of error and it depends which end of the margin people accept.

Ruth Mackay: Great.  Thank you, Ian.  Daran, how can we get more visibility from our raw material suppliers without compromising their IP?

Daran Ponton: That's an interesting question.  I was lucky to get that one, thanks, Ruth.

Ruth Mackay: That's my pleasure.

Daran Ponton: How do we – the question again, sorry?

Ruth Mackay: How do we get more visibility from our raw material suppliers?

Daran Ponton: I guess we go back to a point that all three of the presenters have talked about and that's collaboration and team work.  You probably just need to work with those suppliers and help them understand the reasons for you needing that information and that visibility and that they then become partnered with you to – on the back of knowing, you know, that there's a purpose behind what you're seeking to achieve, so yes, good question.

Ruth Mackay: Thank you.  Another question on testing, and you did touch on this actually a little earlier, John, but Shirley has asked how often do test reports need to be renewed?

John McCosker: The test reports really – it depends on the product.  If we, in the textile industry and as with many other industries, each batch can vary so you need to, as a company, establish your risk.  If you consider the risk, say for instance, is harmful chemicals related to substances and your supply chain doesn't have certification, such as I've mentioned before, then you may have to be in a situation of testing batch-wise.  If you have a history of a supplier who is showing good test compliance, then you can step back and maybe use an AQL basis for doing your testing requirements in that respect.

Ruth Mackay: Okay.  Thank you very much.  Now, we did ask as people registered for this webinar whether you'd have questions and so we had quite a number of questions coming in prior to today and the large number of those or a number of those were actually in relation to building products and so we will be responding, I should say, to all of the questions that have come in and we'll put those answers up on our website, but to just answer a general question about building products, the question really is are they covered and how does the ACCC work with state and territory counterparts.  Now, the safety of building products is generally addressed by state and territory building or electrical safety regulators and under separate laws.  However, the ACL or the Australian Consumer Law can apply to building products, so this will be the case where the products are consumer goods, so if they've been sort of purchased or - by a consumer, then the regime may apply.  Under the defective goods regime, an importer of consumer goods, including building products is considered the manufacturer of those goods and is therefore liable for damages caused by property damage or personal injury resulting from safety defects associated with those goods.  Suppliers are also subject to possible prosecution and significant penalties for making misrepresentations as to the safety or fitness for purpose of goods.  Similarly, the consumer guarantees and recall provisions apply to the supply of building products that are consumer goods.  So, as I say, there were quite a number of questions in relation to the building industry, but I see some more questions have come through to us now, so I might move on to those and, Ian, can I ask you how do I ensure products sourced from other countries meet Australian product safety requirements?

Ian Anderson: Well, the test laboratories in the country in which you're sourcing it will have a copy of the Australian standards and they – you need to have the test report related to the clauses in the Australian standard and check off from there.  The overall standards, there is a very great similarity now between the European and American standards, to the two, and if you get a test certificate which is to the EN or ASTM standards, you can relate it to the Australian product if you wish.  I always caution on that and suggest that you always get it tested to the Australian standard.  That's it.

Ruth Mackay: Okay.  Thank you.  Okay.  Now, we've got a follow on question really here which is we have a European supplier who is indicating that they're internal QA testing is superior to EN71.  What would you advise in those circumstances?

Ian Anderson: One word, caution and totally be sure that the person is not doing it from self-interest and they know that - there are a couple of people in the industry who think that their products are better assessed by themselves than by an outside laboratory.  If that's the case, then they should still have it assessed by the outside laboratory for the cost and for the certainty and surety of being able to supply a quality product.  Thank you.

Daran Ponton: If I can to that, Ian, I would say that factories have internal laboratories, that's a good sign.

Ian Anderson: It is a good sign.

Daran Ponton: As long as it's used alongside some independent testing, so if they're using their laboratories for quality control purposes, to make sure products don't deviate from standards, this can be across a broad spectrum of products, that's a good thing.

Ian Anderson: Sorry, Daran.  One of the major people in the toy industry which is where I spent so many years has a test laboratory set up in China and which is good and which is accredited but the American authorities will not accept a certificate as being final if it comes from a person where the management or control of the test company is materially owned by the owner of the product.

John McCosker: Perhaps that comment before may have come from the marketing division of that company.

Ian Anderson: I doubt it actually.

Ruth Mackay:  All right, John, a question for you now.

John McCosker: Sure.

Ruth Mackay: I have heard that some countries can get the right results if you pay companies enough money.  How can I avoid that?

Ian Anderson: Choosing the right-

John McCosker: You might need to confirm a self-evident fact.  The reality is you can't test quality and compliance in - and a testing house can only test what they're given to the standards that you provide so from that point of view it all starts at the beginning and if your product is in jeopardy with respect to meeting defined standards, then the sort of thing that you've shown us today can happen and will happen most definitely.  Like anything, it's really the outcome of your initial planning, your initial reviews, and then your supply chain compliance programs.

Ruth Mackay: Okay. Thank you very much.  Now, a chemical question.  There's quite a lot of interest in chemical issues in Australia at the moment and again, John, it's for you.  What can I do to make sure products I sell do not contain harmful chemicals?

John McCosker: Okay, first know what you're referring to by harmful chemicals.  Are you referring to mandated or guideline requirements from enforcement agencies or compliance agencies?  At the moment Australia has a focus on a relatively narrow field in terms of the products that I represent, mainly covering azos, formaldehydes and some other issues, whereas Europe, for instance, and the United States have a much broader focus, so you really need to know what the requirements are in your marketplace and as a company you may want to go the extra yards and say, okay, right, I would like to cover my product in Australia with more advanced requirements and performance that's met locally.  Once you have that in place then you have to have a certified body who are doing your testing program, your selection of testing for that testing program has to be controlled, but more importantly your supply chain partner has got to have the ability and commitment to meet those standards.

Daran Ponton: If I can add to that, it might also depend on what product area that you're in, so it's fairly regulated in the cosmetics space that, you know, there's an organisation NICNAS that has lots of guidance and there's probably a lot of homework to be done in that space if you're using or wanting to source those sorts of products.  I think both John and Ian mentioned if you don't have the skills resident within your business, you should go and get some help.  In this chemical space, it's one of the hardest areas for us to just understand.  You probably need some help.

Ian Anderson: If I can just add to that, it's also one of the most costly areas of product testing and you can end up costing your company a great deal of money by not getting the right advice in the first place and going in with a blind approach to check everything because very often the chances of it being there are nil.

Daran Ponton: Okay.

Ruth Mackay: Thank you, and look I want to chip in on that question as well, which is just to say that I do encourage people to look beyond specific regulations in Australia and just be conscious that you have that responsibility to provide safe products and to make sure that you do have a good understanding of what's being used and whether or not there are concerns.  And, look, there's another question that's come in for you from Diane Johnson of the Master Builders Association, who asks if the National Retail Association is interested in working with the construction industry to help ensure product safety standards in products sold by major Australian hardware retailers?  Is there an opportunity for the Technical Standards Committee to do similar work across construction?

Daran Ponton: Look, on the surface, I'd say there probably is an opportunity, but I'd suggest make contact with us directly and outside of this forum. Yes.

Ruth Mackay: Yes.  Okay.  Thank you.

Daran Ponton: Yes.

Ruth Mackay: And, look, we might have time just for one last question, which is for you, Ian, Australia has adopted an ISO toy standard, the EU and US have not.  Does the Australian standard offer real safety benefits over the other international standards?

Ian Anderson: The three safety standards have become more in alignment over the last ten years and the Australian standard is the equivalent of or is better than the others in certain areas.  There are still aspects where the European standard is more rigid than the American or the Australian.  The thing to remember is that the European standard is a hazard-based standard and the American standard is a risk based, and the differences can be quite dramatic, so you do need to understand what you're requiring, but for Australia if you're supplying it into Australia then make sure that it complies with the Australian standard.

Ruth Mackay: Thank you very much, and sorry-

John Anderson: Good point.  Yes, very good point.  Great point. Yes.

Ruth Mackay: Okay.  Well, look, this brings us to the end of our session, so Daran Ponton, John McCosker, Ian Anderson, I'd like to thank you very much for joining with us today to give this webinar.  For the people who have been listening to us, could I remind you that we do have a feedback form available and we'd really appreciate hearing from you about whether or not this webinar met your needs and whether or not there are other things that you would like covered so that we can work on addressing your needs going forward.  So thank you very much to all of you for participating, well, in the seminar today, in the webinar today.  This will be available, as I said, at the beginning of the session on our website within about three days' time.  So we look forward to hearing from you and working with you in future.  Thank you.