REACH, RoHS, SOX, WEEE, FDA regulations, FACTA and Basel III – these are not just a jumble of acronyms, but a small sample of the compliance initiatives that manufacturers have to contend with today.
The regulatory compliance burden on manufacturers is already large and is increasing at pace. To put this in context, data from the Manufacturers Alliance for Productivity and Innovation (MAPI) showed that regulatory costs in the US are far exceeding its growth, rising at an average of 7.6% a year since 1998, with output increasing only 0.4% a year in the same period. In October, MAPI president Stephen Gold told a forum the group co-hosted with the National Association of Manufacturers that: “Each year, federal agencies layer regulations onto manufacturers, one on top of another, without any transparency or clue as to the true cost to our factory sector.”
Andrea Ruosi, CEO of AX for Pharma software company, highlights one example of this: “The FDA has released new draft guidance regarding contract manufacturing arrangements – Contract Manufacturing Arrangements for Drugs: Quality Agreements. This is one example of the ever increasing regulations in the pharmaceutical industry.”
It’s not just the quantity of regulations that are increasing, but the complexity. Manufacturers must be mindful of financial regulations, as well as quality compliance regulations and anything concerning the materials used in their products. “Every year there are more and more regulations that companies must comply with that don’t just affect their finished products, but other areas of their business as well,” says Eduard Marfà, director of EMEA marketing for Teamcenter at Siemens PLM Software. “These regulations affect the way products are conceived, manufactured, serviced and disposed.”
According to Michael Zepp, expert product sales representative for compliance worldwide at Dassault Systèmes, there has often been no commonality in how regulations have been assessed, which increases the complexity for manufacturers. Adding to that, manufacturers have to ensure their whole supply chain is compliant. “As a manufacturer, you often don’t control and mandate what chemicals are used in the materials or parts that are supplied to you, meaning that you need additional data from the supplier to ensure whatever you produce is compliant,” he says.
Another area that poses problems for manufacturers in terms of supply chain compliance is conflict minerals, which are minerals mined in conditions of armed and human rights abuses. “The challenge for manufacturers is that it’s the source of the material as well as the material itself that is regulated,” says Zepp. “So the material from the supplier could meet compliance regulations, but because of its source, the US Conflict Minerals Law could deem that it is not compliant.”
This problem arises from the increasingly global operations that manufacturers run, with the extended supply chain and nature of their products meaning that they are subject to varying degrees of regulation by regional, national, and global organisations. “Regulations differ from country to country,” says Marfa. “REACH and RoHS, for example, are EU initiatives, while the FDA regulates mainly the US market for US and non-US Companies.”
According to Ruosi, in the past couple of years, there has been an effort to harmonise the different local regulations to reduce the cost of compliance for global companies. “The pharmaceutical industry is subject to ever more stringent requirements but now the key players in this sector are trying to find a way to keep costs down,” he says. “This includes the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH). The ICH, brings together the regulatory authorities and pharmaceutical industries of the US, Europe and Japan to achieve greater harmonisation and ensure that safe, effective, and high-quality medicines are developed, manufactured and registered in the most resource-efficient manner.”
However, Zepp says that many organisations consider compliance late in the manufacturing process when the cost of making changes is high, instead of embedding it throughout. “Companies have adopted a reactive rather than proactive approach to regulations, which requires significant resources,” he says. “In addition, many still rely on paper-based processes, which put the organisation at greater risk, as there is more chance of human error through keying information from their paper documents into systems. It is also more time and resource intensive and makes keeping pace with the raft of new regulations challenging.”
“If you think about how much documentation manufacturers in industries such as chemicals, food or pharmaceutical have to produce to be compliant – it’s an enormous amount,” adds Sam Youness, worldwide industry technology strategist for process manufacturing at Microsoft. “It is not easy to search for specific information when the documentation is in paper format. It also means that the auditors have to travel to multiple locations to look for paper copies of all these documents.”
Marfa believes that companies need to establish a framework to manage compliance, as this will enable them to better comply with new regulations as they emerge. “Regulations used to be issued to tackle specific problems, for example with asbestos in construction, but now authorities are creating frameworks for compliance,” he says. “REACH is aimed at protecting against the risks caused by chemicals with its scope of chemicals included expanding over time. If manufacturers themselves create a framework for compliance and embed it into internal processes then when new substances are added, the compliance procedure will be the same.”
Manufacturers also need to understand, manage and control the flow of information and be aware of certain standards they have to meet, such as Regulation 21 CRF Part 11 from the FDA. This sets strict criteria for electronic signatures and documents, with systems having to maintain the digital equivalent of a paper trail.
“Manufacturers need regulated document management and to ensure that all documents in the system are subject to strict controls,” says Ruosi. “Using different systems for compliance, document management, ERP, etc., causes problems with critical information often duplicated, the wrong versions of documents used and a higher level of human error, which adds cost and risk. Implementing an integrated solution such as AX for Pharma makes it easier to comply with quality regulations, specifically FDA validation by reducing risks and minimising the global cost of regulatory compliance, including 21 CRF Part 11.”
Cloud computing is one way that manufacturers can improve the way they manage their documents to ensure a smoother, more efficient and error-free compliance process. “Regulations can be a sticky point for manufacturers and force the direction of their research and development, as well as influencing their supply chain choices,” says Youness. “Having the ability to collaborate in the cloud means they can respond to new regulations in an easier, better and quicker way, and provide better document access to auditors. Manufacturers can also tag these documents electronically to make them easier to search.”
The automotive sector has already started taking advantage of cloud computing to help ensure regulatory compliance, as Zepp explains: “The automotive industry recognised that they had a cross-convergence of the supply chain and, as a result, thought it would be a good idea to exchange all information in one place. This lead to the creation of the International Material Data System, which is a central data repository in the cloud where OEMs can manage environmentally-relevant aspects of the different parts used in vehicles. It has been adopted as the global standard for reporting material content in the automotive industry. It covers regulations such as REACH and ELV.”
Siemens PLM Software is already taking advantage of Microsoft’s cloud computing offering Windows Azure. “We are working with Microsoft Windows Azure to provide our Teamcenter platform on the cloud – whether for a manufacturer, its extended design team, suppliers or customers,” says Marfa.
“Microsoft is investing in the hybrid cloud, bringing together the functionality of the public and private cloud, while also offering platform as a service, infrastructure as a service, or software as a service,” says Youness. “Our cloud offering ensures that manufacturers can scale in a flexible way – through compute power, storage or network – to ensure they cut costs and save time when adhering to regulations, whether this refers to current compliance initiatives or those emerging in the future.”
This article was originally published in the Winter 2013 issue of Prime
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