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Digital EditionBuilding a Culture of Compliance: Strategies for Keeping Your Manufacturing Operations Safe
An airplane door flies off mid-flight. Listeria seeps into deli meats, causing fatalities. A million cars are recalled over a faulty steering wheel. Front-mounted oven knobs are accidentally turning on, causing fires.
All vastly different incidents, sure, but with one shared cause: a manufacturing mishap.
When manufacturing facilities — be it for food items, chair parts, kids’ toys, car engines or what have you — do not meet the regulations set by local, state and federal agencies, they face serious risks. Public safety, workers’ compensation, liability, reputation and more come into play if a manufacturer fails to meet the standards set for their operations.
What Is Manufacturing Compliance, Anyways?
In its simplest definition, manufacturing compliance is meeting product quality and safety standards and regulations set by local, state and federal agencies. But there’s more to compliance than that.
There’s OSHA compliance, FDA compliance, CDC compliance, USDA compliance, not to mention local, state and federal laws. There’s also specific compliance standards set by auditing organizations, as well as individual company rules to adhere to.
Essentially, there are layers to compliance based on location, industry, product type, workforce and more.
With many moving parts, manufacturers are keen to take the necessary steps to be in compliance, lest they wish to face the steep consequences of a mishap. It’s not just about meeting law requirements, either. Manufacturers should be setting their own standards within their facilities to promote top quality products and performance. Compliance is both a human and a product factor — after all, manufacturers should want to promote a safe work environment right alongside safe products.
TJ Richter, executive underwriting officer, middle market manufacturing/wholesale, Liberty Mutual
“Compliance is beyond regulation. In other words, there are certain federal and state regulations that you have to comply with. But the other way that smart manufacturers think about compliance is in terms of industry best practices,” said TJ Richter, executive underwriting officer, middle market manufacturing/wholesale at Liberty Mutual.
Adhering to industry best practices — ones that the manufacturer sets up for its own facilities or ones that are recommended by risk control — are not only a standard to strive for but also good should liability questions arise regarding compliance.
Warning: Compliance Not Met
With many moving parts, manufacturers do have a lot to review in terms of compliance. Lawsuits, injuries and fatalities are some of the biggest risks faced should compliance not be met.
“Manufacturers that are not in compliance can face many risks to their business. This would include … loss of competitive advantage in the market, financial penalties that will vary on a monetary scale, security breaches that include cyberattacks and data breaches, product recalls that can be detrimental to their reputation and possibly boycotted, loss of revenue, and legal ramifications where the manufacturer could face expensive lawsuits by not complying,” said Shawn Knowles, SVP, zone risk engineering, MSIG Insurance Services.
Reputation risk is another.
One glaring example in recent months is Boar’s Head and its listeria outbreak this summer. Fifty-nine reported hospitalizations and 10 deaths have been linked to contaminated liverwurst deli meats processed by Boar’s Head’s Virginia-based plant. The outbreak itself was tied directly to the production process. USDA Food Safety Inspection Service reports on the facility dating back as far as 2022 described dozens of violations, including insects, mold, “blood in puddles on the floor” and a “rancid smell in the cooler.”
The plant has since closed. The reputational fallout has been immense.
While the first noted incident was reported in in July, this is an ongoing investigation due to the fact listeria can take up to 10 weeks to present itself. That’s months of negative news for a manufacturing blunder.
“Reputational risk can be incredibly damaged [by an incident]. Depending upon the litigation that could follow, it could put a company out of business, particularly smaller facilities,” Dan Fegel, head of risk control services and operations, Trucordia (formerly PCF Insurance), said.
“If you’re running a business, the last thing you want to do is create things that would harm people. That would, number one, put you on the hook morally for their injury or fatality, and then the second part of that would impact the ability to earn an income for you or for your employees,” he said.
Compliance Is a Team Effort
A big proponent of compliance comes down to how senior leadership treats it and the message they give to employees.
“It starts with senior leadership,” Richter said, “even with the board of directors or the president, and then it’s got to filter all the way down to frontline managers and production employees, making sure that they’re all involved.”
According to Ryan Tomlinson, senior consultant, E&S Wholesale, Nationwide, when it comes to the root cause of noncompliance, “we often see a general lack of knowledge regarding industry specific standards and regulations. Additionally, employee turnover and inadequate training can lead to noncompliance,” he said.
Manufacturing is not exempt from turnover, with Forbes reporting a 28.6% separation rate for the industry in 2023. As the seasoned workforce leaves, they’re taking their years of compliance training and understanding with them.
“Given employee turnover, training becomes that much more critical to the process of selecting employees and training them, and continually communicating with them,” said Richter.
Training and bringing compliance in early also creates a culture of compliance among employees.
“Each company should ensure that employees are not given performance goals and targets that would allow or require them to bypass compliance to achieve them,” added Knowles. “This is all part of building a ‘compliance culture,’ which results in reducing risk and enhancing operational integrity.”
The Compliance Assembly Line
The final piece of the compliance puzzle comes down to partnering with insurance and risk control to keep up to date on the rules and regulations for manufacturers. Having the right insurance in place is key, from general liability down to reputational risk, but having the right partners can go a long way in providing long-term compliance excellence.
“The best thing that you can do is talk with someone who’s familiar with your organization. Have your consultant help you identify the risks, audit the risks and assess them. Then, put your plan in place,” said Fegel.
Risk engineers have the skillset to evaluate a site for potential risk areas or violations, as well as provide insight on ways to improve overall compliance. They also have the knowledge and foresight on the steps to take following an incident, should it ever arise.
“Risk engineers arrive on site and will conduct audits that include identifying regulatory compliance needs, develop customized plans directed at the specific business to mitigate risks, provide onsite training and resources that will assist in meeting compliance requirements, educate employees or management on pertinent regulatory standards and identify possible vulnerabilities within the compliance, production and quality assurance programs,” said Knowles.
Dan Fegel, head of risk control services and operations, Trucordia (formerly PCF Insurance)
Technology can further serve manufacturers in their compliance endeavors, particularly when it comes to safety and training. From mobile apps to the virtual classroom, technology can play a huge part in getting compliance and safety messages out from the top down.
“There’s a lot of different learning platforms out there that can take what you do and put it in a digital format that helps you deliver better training to an employee,” said Fegel. Instead of lecture halls or companywide compliance reviews, technology opens the door for employees to learn processes and aid in doing their jobs safely in order to produce safe products.
“There’s a lot of different ways to try to reinforce what you’re doing through technology, … and your insurance producer or broker, as well as any risk management consultant or safety consultant, should be able to help guide you in finding the right technology for your business,” Fegel said.
Above all, “the technology should be consistent with constant monitoring of compliance-related factors,” Tomlinson said. This ensures safety, training, protocols and regulations are consistently being integrated into the manufacturing process, from start to finish. &
