Ever since its emergence in the early 1800s, the manufacturing industry has faced numerous setbacks coupled with a highly evolving global industry. The manufacturing industry has been able to thrive despite these setbacks, although with the increase of federal and state regulations over time, the growth of the industry has certainly plateaued. Manufacturers understand that regulations ensure safe and healthy work environments, but does the complexity of regulations add an unnecessary burden to manufacturing operations?
New manufacturing-related regulations have been issued at least once a week since 1981. The National Association of Manufacturers (NAM) has found that the industry faces a total of 297,696 restrictions on their operations from federal regulations.
Examples of government regulations mainly focus on:
- Anti-corruption
- Data Protection
- Employment Law
- Export Controls
- Fair Competition
- Health, Safety, and Environment
- IT Safety and Security
- Product Safety
Although the number of regulations seem to be endless, manufacturers still find ways to comply. Compliance with federal regulations adds a layer of protection over a business. Without compliance, company’s expose themselves to several risks including business, financial, legal, and reputational risks. If found guilty of a compliance failure, a company can be penalized or fined a substantial amount of money.
There’s no questioning the positives that come with regulations, as they ultimately assist in a company’s overall safety. But the sheer amount of regulations has made costs skyrocket for any sized manufacturer.
Small manufacturers with less than 50 employees face the biggest regulatory cost, with an average of $34,671 per employee. For companies with 50-99 employees, regulatory costs averaged at $18,243 per employee. For all manufacturers, regulatory costs came out to be $19,564 per employee on average. That’s an average of $233,182 or 21% of payroll per manufacturing business. Regulations are not cheap for those who comply.
Small to medium sized manufacturers take the biggest hits upon creation of new regulations. Regulations are time-consuming, as every time a new one is created, a company must adjust their production or distribution to stay in compliance. Depending on the regulatory action, smaller sized companies will find that the large amounts of administrative work required will take significant time away from actual business operations.
How to Comply
As stated above, without compliance manufacturers face an onslaught of risks that could severely hurt a business operation. It will always cost a manufacturing business less to comply. Here is a general overview of steps manufacturers can take to find and comply to new regulations:
- Identify new regulations through research
- Determine how the regulation impacts your business operations and establish goals
- Develop or revise solution to operating procedures
- Implement newly improved procedure and training
- Audit compliance over the long term
Conclusion
An executive order was recently passed saying that for every new regulation created, two should be removed. Ever since the signing of that executive order, 860 proposed regulations have been withdrawn or delayed. Steps like this are being taken to attempt to declutter the manufacturing industry’s regulatory mess. But will it be enough? If regulations continue to be redundant, poorly designed, and unnecessarily burdensome, should government continue to be involved in business?
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