Wednesday, October 6, 2010

CPSIA - Stories from the Front (My "Vivid" Imagination)

783 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 27 days left until Election Day.

Have I ever mentioned how the CPSIA is strangling us to death slowly, death by a thousand cuts? I know the media and the "leaders" at the CPSC want me to put up bodies, my word and my reasoning are not enough. I also realize the body they want to see most of all is mine. Sorry, guys, I am working to prevent the delivery of that evidence to you. After all, anecdotes aren't evidence. Somebody said that once . . . .

How about some other evidence (anecdotes) from our business in recent days?

a. Good news for the U.S. economy? We just added our SIXTH person to our growing department of compliance and safety folks. Please NOTE that the volume of work is going to EXPLODE when the testing stay is lifted, so these hires are just a starter. For many years, it was one or two people doing this job (including me). No longer . . . .

I know what you're thinking, this obviously confirms how much we needed the extra safety people. In addition, it follows naturally that everyone is so, so, SOOOO much safer now that we have six pairs of eyes on the ball, not the one or two pairs we relied on for years. And those are jobs being created by Congress and the CPSIA - we must be so much better off . . . right?

Well, let's take a look at those points.

First, are we adding jobs? No. The department is clearly growing, BUT those jobs do not create revenue. They create COSTS. We are adding those jobs without increasing new economic activity (we're not growing) - in other words, our burden to conduct the same or less business is growing. That's simply a drain. Even WORSE, as a company, it turns out we shrunk our headcount in 2007, 2008, 2009 AND 2010. So much for a recovery . . . . If we are shrinking our headcount this year but have a growth department like Compliance, what does that mean? It means that we are reducing our investment in revenue-generating activities like Marketing and Sales, and shifting our personnel investment into managing bureaucracy. To pay the cost of paper pushing, we are shrinking overall headcount.


As for safety, we achieved a remarkable 26-year track record with far less investment and far fewer people. I firmly believe that more cooks in the kitchen sharply raise the probability of poorer results. Yes, more is NOT better. Why? Because the focus on our efforts is now COMPLIANCE, not safety. [We still work on safety first but it has a lot more competition from paper pushing.] Compliance monitoring and "gotchas" have become a perverse parlor game. Consider Sean Oberle's recent meditation on Mood Rings. The subject of whether the rings are SAFE never comes up, it's all about whether they fall within the rules or not. Safety is secondary in the CPSIA scheme - and everyone is losing sight of what we're trying to accomplish. Paper stacked to the rafters won't make anyone safer but then again, it's comforting to have so many rules to follow.

Do I recall correctly that Mattel with its many CPSC-certified internal labs just recalled about 11 million units of toys? Hmmm.

b. Profit Prevention in Full Bloom at Learning Resources. We had two lessons in the joys of safety compliance money-burning in recent days. Consider these stories and their implications on incentive, motivation, ability to fund our operations, fairness and most importantly, safety.

First Case: We sold a longstanding product incorporating a motor to a mass market retailer with its own testing regime. Their testing regime includes CPSIA tests and is administered according to their specifications by a certified test lab of their choosing. The motor for that item was tested and failed for phthalates. We don't know why - it has been made reliably without the six verboten phthalates since 2007 (many passed tests in our files). So we pulled a second sample from the same batch, and bingo, it passes. This happens all the time.

Of course, certified labs are never wrong. We are the only ones who are ever wrong. After all, the certified labs are CERTIFIED. No doubt that's how Mattel keeps its shop so clean. Oops, they had some big recalls recently, didn't they? I am confused . . . .

Anyhow, back to my story. Motor fails for phthalates and then passes. [Let's not dither over whether phthalates on internal components could even THEORETICALLY harm anyone. It's all about compliance.] Unfortunately for us, this nonsense took two weeks. So the customer penalized us by making the sale a guaranteed sale. If they don't sell out, we lose.

Total cost - unknown. Was any of this cost budgeted for? Of course not. Is our customer happy? No. Could we control against this risk? Probably not, as the explanation of the "failed" test is not and never will be known. We are not making pharmaceuticals here, we make injection molded toys, but we are being held responsible for chemistry and testing results that have no real world significance.

And, it is worth mentioning, all this cost and disruption had NO impact on safety. It only reduced our profit and made us miserable.

Second Case: Another motor case. In the mania over safety and compliance, many formerly minor "gotcha's" have become elevated in signficance. This time, we were trying to mollify a customer over EMC approval of a motor. Electrical motors emit a frequency, apparently, which is regulated. You know, the government doesn't want our motor-powered toy to bring down a plane. We are required to test several of our products, sometimes even calculators. In this case, the motor failed . . . although we have no record of planes crashing after several years of sales of this toy and its motor. Our customer then hired a consultant at its expense to tell us how to "fix" our motor. The result - we were told to add two resistors to the motor, which we did, but then it was too weak to power our toy.

Then we had to find another motor. This took time and finally, we found another motor and had to have it retested. This entire process took two months. Once testing was complete, we were so late with this Xmas order that we were forced to bring in inventory by air freight to make it up to the customer. This cost about $15,000 in air freight and testing costs were an estimated $5-6,000 more. Think of how safe the planes are now!

This customer is a big customer of ours and if we didn't air in product for them, they told us they would have cut us off.

We had a great relationship with the customer before this interaction. How do you think they feel about us now? Do you think they respect us as much? Do you think they believe we "know what we're doing" because our motor failed an obscure and meaningless test? Does it matter that it is basically impossible for a terrestrial toy of this magnitude to influence the operation of a plane miles up in the air? No matter what, we look bad and we lost all of our profit and more on this ordeal, not to mention our good name.

And no one was made safer.

Thanks Congress! Thanks CPSC! Thanks Democrats! Can't wait to show my appreciation in the future. I'll find a way.


Mars Feeney said...

The fact that they are unable to see the economic damages of this law shows that they are totally out of touch with how business works. Business is the lifeblood of our country if our leaders don't get business they have no business being our leaders.

But more importantly, if they want to see evidence of damages, I do too. I want to see hard evidence of the dangers they claim the CPSIA protects us from. Because, as Rick has made abundantly clear here on this blog, there doesn't appear to be any such evidence. Quite the contrary. The very premise of the CPSIA appears to be based on psuedo-science.

So it appears to me that not only do our Democratic leaders not have a clue about how business works thay also appear to be completely incompetent when it comes to interpreting scientific evidence.

As a lifelong Democrat I thought the Republicans had a lock on psuedo-science, especially the last administration. How wrong could I be? It just goes to show you the importance of objectively evaluating ones own assumptions - another quality our Democratic leaders appear to lack.

Anonymous said...

If you lost your profit then why are you still selling to that customer? Tell them "redo the test to verify failure on multiple units" and don't sell to them anymore. Go Galt. If you're going to complain about getting raped, then why are you lifting your skirt?

jennifer said...

I feel for you - thanks for sharing the examples of how crazy all of this is and the lack of any sort of value to the regulations.

I was amazed to see this new stroller recall this morning injuries. I own this stroller too just like the other ones and there is nothing wrong with it. If you put a child in a stroller you have to strap them in or any number of things could happen. I wonder if the new ombudsman can answer how a manufacturer makes their customer use products correctly....

I don't know if it is worth it to keep going most days - it is like the darkness is always around the corner.

MICHAEL said...


First of all, two years ago this set of problems didn't exist.

Second, perhaps the customer in question represents a significant portion of Rick's business and telling them to take a hike is an indirect way for him to effectively let go of a significant portion of his workforce - and he isn't as callous toward people as Congress, three of the CPSC Commissioners and perhaps you are. Or maybe Rick's business model is to deal with customers openly with an eye toward a longterm respectful relationship - and taking a hit is part of that.

Third, at the risk of being sexest, you appear to harbor misogynist leanings, as victims of rape don't ask for it, no means no.

In this instance, there is no doubt that Congress and the CPSC are having their way with small business, but we certainly didn't ask for it and we certainly have yet to receive a fair shot at having our interests represented. Mattel's bad behavior precipitated CPSIA and Mattel helped write the resulting legislation. Whatever the real agenda of CPSIA is, it has nothing to do with safety, the compliance costs will smother many good and previosuly successful businesses and on the balance sheet of 'harm to children' the side populated by 'children with parents who's jobs have been lost to CPSIA' and the resulting distress and destruction to their lives far outways the side represented by 'injuries to children that have been prevented'. This nation's children are net losers to the concrete boots called CPSIA.

Anonymous said...

Many of the cpsia testing are blown out of proportion. Testing such as phthalate are way too strict and unnecessary. The baby boomers grew up with pacifiers that contain phthalate, they played with lead toys. There was never any correlation under normal use of these pacifiers and lead toys with cancer links. It is not like kids are eating these stuff in bag loads. Baby boomers are a lot healthier than kids nowadays even though they were subject to more toxic toys back in the day. The government should be focusing on chemicals used in food more, this is what is killing our kids! More natural food, less of foods created with chemicals.