MarketEye: Environment and the Supply Chain

04.28.2010 // Posted by: Tom Valliere // Posted in: Articles, Supply Chain

Statements of fact and or opinions expressed in MarketEye by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

That the electronic supply chain has evolved over time is a fact most of us can agree to. However that evolution from the perspective of this writer has been far from linear. In my 40+ years in the electronics business, I can see several sea-changing events that for me have defined or re-defined the electronic supply chain.

Probably the first was the advent of MRP/ERP systems in the 1970s. By the middle of the 1980s most companies had embraced these systems and largely moved away from manual manufacturing scheduling and materials planning. Where companies had large numbers of production planners laboring over ledgers and walls of boards updated with grease pencils, there were now a small number of planners managing exceptions using spreadsheets and computer terminals.

The second wave was the introduction of e-commerce. Beginning with Electronic Data Interchange (EDI) and evolving up through today’s web-enabled Extensible Markup Language (XML) protocols these tools allowed for direct Business to Business linkages of customer planning systems and purchase orders with automated acknowledgment and fulfillment by suppliers. Invoicing, payments, forecasts and other signals were standardized through Rosatttenet PIPs and highly defined EDI signals.

The third game changer was the rise of the Electronic Manufacturing Services (EMS) sector and the wholesale outsourcing of the electronics manufacturing role to these 3rd party companies. Closely on the heels of the migration of manufacturing came the migration of the material management functions including planning and purchasing. To say this has caused major changes in our industry would be an understatement and even today supply chains suffer from lack of end to end visibility and conflicted signals.

Today we have what I believe will be the fourth significant event in supply chain evolution – the “green” supply chain.

The Green Supply Chain:

Over the past few years, there has been an explosion of environmental related activity that has a direct bearing on the electronic supply chain. Starting with the End of Life Vehicles directive, then, more directly, the RoHS (restriction of the use of certain hazardous substances in electrical and electronic equipment) directive proposed and enacted by the European Union in the early years of the new millennium, various restrictions and reporting requirements have mushroomed across the globe. Adding to the complexity are overlapping, superceding and non-harmonized additional requirements being enacted by many large OEMs.

An entire industry has emerged around Social and Environmental Responsibility regarding compliance with various “Codes of Conduct” to insure safe and equitable treatment of employees and adherence to environmental safeguards.

The full impact of the greening of the supply chain goes beyond the intended scope of this article but will be examined in subsequent articles. For this installment we will focus on Product-Targeted Environmental Regulations and their effect on the supply chain information flow.

Data Reporting and Management:

We are awakening from a prolonged period of weak demand and component oversupply during which suppliers and consumers all shed resources. Components were in abundant supply, prices eroded and the whole process limped along in a semi-automatic and forgiving manner. We now find ourselves awakening in a significantly altered environment where, among other things, data reporting requirements through the supply chain are exploding at an exponential rate while tools and resources to manage these new data requirements lag or have atrophied due to the market conditions.

Consider what has happened in the past couple of years.

• RoHS-like requirements have expanded far beyond the European Union.
• The list of reportable substances in the Material Composition Declaration for Electronic Products – Joint Industry Guide 101 (JIG-101) has grown considerably
• REACH - Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) has placed additional reporting demands for substances of very high concern (SVHCs), a list that continues to grow.
• Waste Electrical and Electronic Equipment Directive (WEEE) requires information regarding hazardous content and location for waste disposal and recyclers Japan Green Procurement Standardization Initiative (JGPSSI) and other industry, NGO, and Government efforts add to the reporting burden.
• Carbon, Greenhouse Gas Protocol (GHG) and energy content reporting are in their infancy but are expanding rapidly.
• Reporting and measurement standards have lagged. (Rosettanet, EDI, IPC etc)
• Tools to receive, transmit and manage the data are not widely implemented

Where in the past a few simple EDI signals or Rosettanet PIPs managed most of the supply chain data needs, we now find that each part and supplier combination requires several megabytes of data to be compiled, transmitted, stored, maintained and managed. Different customer and regional requirements necessitate complex management matrices and tools to insure the correct product content for each geo/customer combination. This has spawned a cottage industry of companies that specialize in producing these reports.

New (and largely non-harmonized) reporting and restriction regulations are coming from all directions requiring extensive regulatory monitoring that exceeds the capability of all but the largest supply chain entities.

Content reporting:

In order to comply with today’s requirements and what we know is coming in the near future, having a complete chemical content disclosure for each component and component/supplier combination in your product enables you to reduce response time and reduce business risk as more substances become disclosable or restricted. A RoHS certificate of compliance (C of C) simply does not suffice.

China RoHS, the proposed recast of EU RoHS, REACH, customer specific requirements and many others ultimately require that you know exactly what is in your products, the concentration values (by varying homogenous rules) and the exact locations of these substances. As the reportable substance list grows continuously, you need full disclosure up front to avoid endless repetitions of the query and collection process.

Information Overload

Managing the many megabytes of environmental data that a typical BOM requires is difficult. The initial acquisition of the data represents many challenges regarding format, accuracy and completeness. Once the data is acquired, it must be stored in a manner that is retrievable and capable of being aggregated and reported at many levels, including part, board, module, and product. Of course this data is constantly changing as suppliers tweak their processes so a means of maintaining currency is also required. For most companies, this represents hundreds of megabytes of new and additional data that ties to each of their products! It is simply not possible to acquire and manage this data without a high degree of automation.

Data Acquisition:Getting the data from the component manufacturer or supplier to the customer is challenging. The mainstream suppliers are now posting the information on their websites for most parts. This information however, must be located (some websites are pretty cryptic) and downloaded into some sort of data management system. In other instances, the data is not available on the website and must be requested through a sales or technical support channel. Sometimes this data is forthcoming without issues, many times it is not. Collecting this data is expensive and time-consuming and has spawned a number of data management companies that specialize in doing this.

Data Formats: The current standard and format of choice for many users is the IPC 1752 form. The newly released version, IPC-1752A addresses some issues with earlier releases and is a significant improvement for most users. Unfortunately, usage of the IPC standard is not universal. You may expect to receive data in many different formats. This poses many issues for the user. As the content data for a single component broken down by homogenous location may entail many lines and more than 1 megabyte of actual data, managing varying formats becomes very difficult. While many environmental data management programs provide utilities for uploading data of varying formats it complicates the activity and increases the skill level required.

Errors: Further complicating the process is the high error rate observed. Error rates of 30% or more are common depending upon the component type and source of the data. Many errors are simple and obvious such as missing or incorrect CAS numbers, however the high error rate on the obvious casts doubt upon the integrity of the report as a whole especially regarding completeness of disclosure. As above, many of the data management programs include some form of error checking. This author advises the user to check carefully into the robustness of this error checking feature. Expect high error rates.

Tools: Many of the Product Data Management companies and the companies that specialize in environmental data collection also offer database tools for managing this large volume of data. When shopping for these tools, aside from the obvious support issues, look carefully at their error checking, data importing, and reporting capabilities. Examine how the tool will allow you to produce customer specific or regulation specific reports. Remember, if the tool cannot do it, you will be spending evenings and weekends pouring over these megabytes of date to manually generate the reports. They are not trivial tasks.

In closing:

This is a complex topic that I cannot hope to condense to my allowed 1500 words. I have attempted to give the reader some insight into the magnitude of the problem and the urgency to address it now. I will revisit this in future articles and provide additional detail and examine other environmental impacts to the supply chain. Some closing thoughts:

1. How to acquire this data?
2. How to manage this huge data mass?
3. How to keep it current?
4. How to use it and translate it into customer and regulatory agency reports?

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