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The high cost of noncompliance – what we can learn from Shrek

Last year at PTC/USER 2009 I wrote about the Mattel toy recall and the record-setting civil penalty imposed because their products contained excessive levels of lead. This year McDonald’s is in the headlines for similar reasons. A recall is underway of 12 million cadmium-tainted “Shrek” drinking glasses sold by McDonald’s. For every headline like this one, there are hundreds of other incidents we never hear about. Restricted substances and other regulations are having a big impact on all manufacturers. Our recent industry survey illustrates how.

It’s not just toys and fast-food promotional items. All products are affected. The survey results showed that manufacturers in various industries and doing business in regions around the world are feeling the impact of product compliance failures. Fifty-five percent of our more than 300 respondents had experienced some impact. For companies with greater than $5 billion in revenue it was significantly higher – 70% reported some impact.

As you can see in the chart above, fines and penalties – perhaps the most obvious potential impact – ranked a distant third among all the impacts. Impacts related to blocked or delayed shipments ranked much higher. Losing revenue, whether it’s due to a compliance failure or a supply chain disruption, is the most commonly reported impact.

We’ve seen small amounts of restricted substances in inexpensive components jeopardize tens even hundreds of millions of dollars in product sales (See The $50 million dollar cage nut). The stakes are high – a hard lesson we can learn from Shrek.

For more survey results, company interviews, and additional analysis, download the Tech-Clarity whitepaper, Product Environmental Compliance.

For additional survey results, attend my presentation at PTC/USER 2010, Developing Greener Products, at 2 PM tomorrow in Suwannee 12. Hope to see you there!

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