Compliance reliance

Compliance reporting, still seen by many as yet more red tape restricting the flexibility of already over-burdened industry, is here to stay. Indeed, the weight of legislation, particularly for manufacturing businesses, is growing almost by the month, as government seeks to balance the conflicting requirements of an increasingly risk-averse electorate with its stated goal of reining in the excesses of an ever more litigious society. One plain implication is inescapably increasing costs for all businesses, only marginally mitigated by better protection against expensive litigation, whether originating from employees, third parties or the state. However, another is a pressing requirement for a good dose of automation for the processes surrounding administration. And what's interesting here is that, if implemented thoughtfully, compliance systems can also promote serious improvements in terms of productivity, downtime and profitability. First, though, it makes sense to review your current exposure to health and safety related incidents, especially in light of recent changes in regulations, or more accurately their interpretation. For example, do you know how many subcontract workers are on site? How many are working for tier-two, -three or -four suppliers? What visibility and control do you have of your supply chain? What risks are you exposed to, in terms of health and safety, for your suppliers' employees? What would be the consequences of a fatal accident caused by, say, a tier-three subcontract worker? Per Karschowski, European region director for supplier prequalification group Achilles, laments that for far too many, the single answer to all these questions is 'I don't know'. Perhaps worse are the numbers under the misapprehension that their contractors shoulder any risk. "Most procurement professionals are adept enough to ensure that principal contractors are compliant with health and safety working practices and legislative requirements, but then just trust to contractual clauses … for accidents caused by subcontractors," he states. Karschowski believes that many managers remain unaware of changing attitudes to responsibility for health and safety at work. "Those doing the purchasing are now expected not only to check for proof of a supplier's compliance to health and safety requirements, but also to monitor their status – and that's across the entire supply chain, down through all the tiers of subcontractors," he warns. "Increasingly, the burden for compliance is being shifted from the provider of goods or services to the procurer, as demonstrated by the new European Directive on chemical safety." The result: accidents are not only shocking and potentially damaging to a manufacturer's reputation, but are also costly, cause delays and can result in litigation – with directors exposed to prosecution, if adherence to correct procedures all the way down the line cannot be proven. "Those procuring services must gain a greater visibility of their supply chains, through all the levels of suppliers and subcontractors, to ensure full control over what happens on their own premises or within their spheres of influence," advises Karschowski. But while his warning of dire consequences for the unwary may be salutary, it is important to recognise that compliance systems can also be part of a solution driving useful business improvement. How? The operative word is 'visibility'. The systems best placed to deliver the required insights range from nothing more alien than ERP and content management systems at one level, the likes of shopfloor data capture systems at another, and even intranets and email. Equally, the user interface may vary – larger corporates are tending to favour Microsoft SharePoint. But the point is that investment in visibility need not be divorced from the goal of improving business efficiency. It's no coincidence that research earlier this year by Aberdeen Group found that top performing project-based manufacturers see best business improvements when they focus their ERP development efforts on visibility. The analyst's study suggests that where firms tune their ERP in this direction, on average they slash operating costs by 20%, administrative costs by 18% and inventory by 22%. They also improve OTIF shipments by 24% and internal schedule compliance by 20%. As Kevin Prouty, research director at Aberdeen Group, puts it: "Visibility in processes and standardisation of processes are critical to efficient operations." Admittedly, in this case it's about insights geared to complex manufacturing operations, but the point is clear enough. Returning to health and safety compliance – which is about people and processes – again, it needn't be the ERP system that delivers the goods. Shopfloor data capture systems, time and attendance (T&A) systems and manufacturing execution systems all concern themselves with factory operations and share three key attributes – real-time visibility, a focus on resources (including people) and processes, and integration into ERP. One company that turned nothing more complicated than its T&A system to manage health and safety compliance – and then also scored handsomely in the production improvement stakes – is domestic boilers manufacturer Vaillant. Allan Harley, UK health and safety manager for the Belber, Derbyshire-based factory, claims that main achievements over a three-year period include: absence reduced by 31%, from 4.1% to 2.8%; lost time due to skills shortages slashed by 80%; staff turnover cut from 3.8% to 0.6%, including typically more mobile office staff; and temporary staff reduced by 30%. Equally impressive, however, has been the system's role in, first, reducing overtime costs, through improvements in planning labour, and second, helping managers to identify non-productive time in support of the firm's JIT, kaizen, lean and TPM initiatives. These appear to be in large part the result of Harley's background in continuous improvement. He explains that, back in 2003, Vaillant had installed a Kronos T&A system at Belper. "But what started as a system to monitor employee working time for payroll purposes has since evolved into one of the platforms for ensuring that the plant is run at optimum efficiency. We rely 100% on two core systems at Belper to drive efficiency, maintain margin and increase productivity – Kronos and SAP." Why such a key role for the T&A system? Harley makes the point that, although final assembly work at Belper is semi-skilled, operatives build each unit complete, so training has to be intensive and ongoing. "We invest heavily in our people and compliance, but understanding where people are and any skills gaps are also critical. Losses in our production can only be picked up by expensive overtime. So our initial aim was to look at improving [people management] and to identify useful areas, such as sickness levels, people working too many hours and certain operatives we couldn't do without." With Kronos, he says, managers could link these with compliance monitoring, such as that required for the Working Time Directive. "For example, the system has been configured so that it will not allow staff to clock on until they've had the required time off. But it's also the central health and safety database, holding all records of licences and training – for instance, for working with the presses or driving forklift trucks, but also fire marshals, first aid support, etc." So at one level, his system automatically documents who did what, when, with which certification and following which procedures, all date stamped. But at another, it means Vaillant's managers can look ahead and not only plan production, optimising operations in line with skills availability, certifications, and mandatory health and safety requirements, but also schedule appropriate training as well as retesting for licence holders. Making that work, however, has required ingenuity. Harley talks, for example, of offering to pay all staff needing to attend hospital appointments, as long as they inform their managers in good time. "It still counts as lost time, but we can plan around it so we don't lose production," he explains. Beyond that, he also mentions using the system to highlight absenteeism, and so focus managers on rooting out causes. "They can offer more flexible working, even part-time shifts, if that can help, or alternatively use the documentation for disciplinary proceedings." Add to those more flexible holiday planning, flexible Friday afternoon shifts and a bonus scheme related to multi-skilling, and it's not difficult to see why the system is so valuable. And much the same goes for Vaillant's production improvements. Harley makes the point that going lean means understanding the true cost of production – and that is only possible when you know the time and materials that make a direct contribution. Hence the firm also uses Kronos to monitor employee activities on the shopfloor. When they are not working on boiler assembly, they are required to log time against pre-set codes, such as union meetings, waiting for parts, health and safety briefings and machine downtime, he explains. "With Kronos, there's no guesswork around lost time and, as a result, we can analyse lost hours and work hard to reduce them. Using the system, we've identified previously unaccounted for downtime due to people taking time off at short notice, maintenance issues and supplier problems – and successfully addressed these and other issues." It's a virtuous circle of not only refining time and material standards in SAP against reality on the ground, but also being able to react to, and plan for, events. system selection Compliance is one of the few aspects of business that can benefit from a corporate, non-divisional system. That's partly because there is value in pushing adherence business-wide, as well as aggregating events to the highest level to assist with corporate learning. But it's also because compliance – specifically including health and safety – largely transcends the traditional boundaries of different commercial, process and market practices. As one source put it: "Corporations can and should learn from events, even if the processes at their various business units are different. Health and safety information needs to be communicated widely so that managers can look at themselves. You need to give it wide visibility." She isn't, however, prescriptive about the type of system required, noting that it doesn't have to be the ERP system: it could simply be accomplished on an intranet or even by email. The route to selection involves taking into account business size, existing systems of record and then balancing common sense and regulation. That said, the ERP giants are on the case. SAP's latest release of GRC (governance, risk and compliance) software, for example, now provides a single, unified environment for management, monitoring and analysis. Jim Dunham, SAP's group VP for GRC solutions, says a key benefit is that the system integrates GRC into everyday business processes, helping make risk management, regulatory compliance and safe, productive operations standard practice. Similarly, Oracle recently introduced environmental accounting and reporting for Oracle E-Business Suite and JD Edwards EnterpriseOne – in this case to help users track emissions and environmental data. "Environmental considerations, such as emissions reporting, are part of the new-normal for all organisations," states Jon Chorley, vice president of product strategy, Oracle. Meanwhile, if you're worried about the rules governing electronically stored and processed information, you might want to talk to AvePoint. With software ranging from tools capable of migrating compliance-related data intact out of older content management systems, to black box solutions providing essential integrity for corporate Microsoft SharePoint environments, the firm appears to have just about all the bases covered. permits to work Steel fencing and installation contractor Zaun, which has been responsible for the temporary fencing around London's Olympic park, is using online forms, created by Bibby, to ensure its health and safety compliance. Kerry Friedl, contracts administrator at the Wolverhampton-based firm, says that Bibby's eRAMS (electronic risk assessment management system) provides pre-populated, tick-box risk assessment forms and method statements for all sorts of site work. "We log in, go to the forms we need and it's a simple task of ticking or unticking boxes. Then we can email them to our customers, attached as PDFs. The installers sign to say they have read [the forms] and will follow the method statement [and] the customer sees that we're competent and have a management system in place," she explains. Friedl states that risk types covered by the online forms range from manual handling to working at height. However, there are also COSHH assessment forms, blank risk assessments, health and safety procedure checklists, workplace welfare and premises checklists, forklift truck checklists, etc. "Creating these forms for a job used to take me about half an hour. Now it takes five minutes."