Ensuring Compliance: A Content Perspective

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Ensuring Compliance A Content Perspective
Global Supply Chain Management ForumStandford
University19 April 2006
Scott WilsonContent Solution StrategistIHS
Parts Management Inc.Scott_Wilson_at_ihs.com
Rich HessCSR ManagerSun Microsystems,
Inc.Richard.Hess_at_sun.com
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Agenda

• Managing a Complex Environmental Framework
• Rich Hess, Sun Microsystems
• Addressing the Widening Content Gap
• Scott Wilson, IHS
• Questions From the Audience

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More than Just RegulationsRisk and Opportunity
Q4 2001 Cadmium found in Sony Playstation
cables by Dutch port authorities under the Dutch
environmental regulations. Lost opportunity
associated with this estimated at 160M. Rumour
is Dutch authorities were tipped-off by a
competitor.
Suns CoolThreads technology increases the
performance of its servers fivefold while
reducing energy consumption, thus creating ROI
for its customers.
Law and regulation can be market enhancing when
all regulated entities face the same obligations
under the law, the smartest corporations will
find a way to comply with imagination and less
cost. Ben Heineman, Jr SVP for law and
public affairs at GE

• Wal-Mart Stores, Inc. has partnered with
  Toshiba America Information Systems, Inc., to
  develop the first RoHS (Restriction on Hazardous
  Substance) laptop available in the U.S. retail
  channel
• Although there is no requirement in the United
  States for manufacturers All personal computers
  sold at Wal-Mart will meet the RoHS standard by
  July 2006.
• Feb. 22, 2006
• PRNewswire-FirstCall

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Where are Manufacturers today? Widening Content
Gap Puts OEMS and EMS at Risk
Content Requirements
Level of Effort
Component Engineering Capacity
2001 2002 2003 2004 2005 2006 2007
2008 2009 2010
Business stall
Business growth
WEEE / RoHS
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Managing a Complex Environmental FrameworkSun
Microsystem's Perspective
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Global Environmental Drivers

• Governmental/Corporate Citizenship
• Private/individual concerns
• Environmental headlines
• Climate change
• Energy costs
• Sustainable practices
• Sarbannes-Oxley (SOX)
• ...

Everyone and Everything Participating on the
Network
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Global Environmental Compliance

• Monitoring
• Global coverage
• EU
• US
• China
• Dynamic environment- fast tracked vs paced
• Types of regulations
• Chemical Content- RoHS
• End of Life- EU WEEE, US E-waste
• Energy efficiency- Energy star, EUP
• Packaging

Everyone and Everything Participating on the
Network
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Global Environmental Compliance (con'td)

• Complexity
• Standardization
• Information content and scope
• Permissible values
• Labelling
• Reporting requirements
• Intervals
• Languages
• Declarations and formats

Everyone and Everything Participating on the
Network
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Global Environmental Compliance (con'td)

• Complexity(cont'd)
• Legal interpretations
• Directives vs transpositions
• Customer requirements and negotiations
• Volumes
• Amount of legislation
• Numbers of suppliers
• Products and components
• Supply chain
• Accessibility
• Verification and audits
• Flexibility

Everyone and Everything Participating on the
Network
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What Sun is doing

• RoHS
• Formed PMO 5 years ago
• Heavily invested in
• RD
• Supply chain queries
• Consortia activities
• Expandable/Scalable Database - IHS
• Coordinated global tracking process for
  regulatory requirements
• Internal stakeholder group to vet upcoming
  regulations more efficiently
• Implemented a scalable take back process in
  EU and US which will be moving globally

Everyone and Everything Participating on the
Network
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What Sun is doing (cont'd)

• Energy efficiency
• Niagara and Galaxy servers
• Thin Clients
• Grid
• Climate change
• Openwork program
• Commute alternatives
• Energy efficiencies
• End of life
• Eco-design efforts
• Next set of chemicals
• Scaling recycling

Everyone and Everything Participating on the
Network
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What is needed

• Standardization
• Practical application of environmental intent
  with regulatory bodies
• Support for and development of a chemical
  character database for shared suppliers.
  
• Unique suppliers can be segregated
• Management system software for accessing
  database, tracking, analyzing and reporting

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Addressing the Widening Content GapExpertise
from IHS
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Assess environmental product complianceSelf
Assessment available upon request
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Manufacturers Readiness and Exposure varies by
industry
Environmental Compliance Assessing Product
Exposure and Executing a Strategy for Readiness
Eric Karofsky, Michael Burkett, and Kevin
Omarah AMR Research
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Environmental ComplianceInformation chain macro
view of information flows
OEM
All Manufacturers
Customers
Materials
Recyclers
Headquarters
Materials
Consumers
Component
OEM
Businesses
Boards
Board
Third Party Recyclers
Factories
IPC 1752 Other Material Declaration Forms
Subsystem
Material Declarations
Product Specific Compliance Certifications
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Environmental ComplianceInformation chain micro
(internal) view of info. flows
Compliance-related Characteristics
Compliance Reporting
Compliance Engineering
Reporting and
Regulation
Engineering
Cost
Restrictions
Design Rule
Technical
Changes
Characteristics
Reliability and
Manufacturing
PPL
Quality
Capacity
Marketing/Sales
Engineers must deal with a large increase in part
information
Engineering
Component LCM
(cont.)
Inventory
Procurement
Partial View
New Part Intro

• 80 of life cycle costs are locked-in during the
  early design phases

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Required Information to supportCompliance,
design, procurement, manufacturing, reporting

• Overall compliance
• Part selection
• Analysis and Reporting

• Compliance analysis
• Aggregating and Reporting

• Part selection
• Part handling and part ID
• Manufacturing compatibility

• Backward Compatibility with Pb-based processes

• Part selection
• Procurement
• End of Life Planning

• Part selection and NPI
• Procurement
• Compliant part identification

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Complete Compliance SolutionsSupports Internal
and External Information Use Models
Product Design
Service
Manufacturing
Sourcing

• Component Supplier Management
• Design for Lifecycle
• BOM Analysis

• Design for Compliance
• Design for Manufacturing

• Compliant Replacement Part

Inbound Data Sourcing
Outbound Reporting

• Applications
• Decision support workflows
• BOM analysis, Reporting

• Content
• Reference databases
• Sourcing/processing data services

• Verification
• Lab-based analysis
• Supplier surveillance

• Platform
• Eco-responsible servers
• Secure environment for information

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RoHS Directivetells what, not how

• Provides criteria for compliance
• Doesnt tell companies how to ensure compliance
• Doesnt tell companies how to substantiate
  compliance
• Doesnt tell companies how to ensure compliant
  products are manufacture-able
• Leaves it individual countries to transpose into
  law and enforce
• How will countries ensure compliance?
• Material Composition Declarations?
• Physical Testing (government or independent lab)?
• What are companies to do in this time of
  uncertainty?

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Due Diligence RoadmapBased on UK DTI Guidance
Document (August 2005)
Yes

• Same supplier?
• Regularly checked over prev. 3 yrs?
• Always RoHS?

Component / Material
High risk of a banned substance?
No further action
No
Yes
Yes
No
Assessed in past 12 months?
No
Reassess Marked to indicate compliance?
Analyze every batch until confident
Yes
No
No
High risk component or material?
Previous declarations accurate?
Yes
Request materials declaration
No
Yes
Certificate Obtained?
New part or new supplier?
No
Yes
Random analysis
Yes
No
Doubt over reliability of declaration?
Analyze / Qualification (Repeat)
No
Yes
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Due DiligenceComplete Compliance Content and
Verification Solution
No Parts Some Parts All Parts
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Due DiligenceMaterial Declarations and Standards

• In house surveys and templates
• Vast array of formats and attributes constantly
  changing
• IPC-1752
• Emerging and respected standard
• Single part form currently under review
• Multiple part form being developed
• Joint Industry Guide (JIG)
• EIA, EICTA, JGPSSI
• JGPSSI
• Rosetta Net (Partner Interface Process (PIP))
• 2A10 Design Information Distribution
• 2A13 Material Information Distribution
• 2A15 Material Information Request
• Independent Service Providers
• IECQ
• Process Standard

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Due DiligenceMethods and Standards for
Compliance Testing
Sample Preparation
Test Strategy
Surveillance

• Determine homogeneous materials
• Deconstruct and prepare homogeneous material
  sample (cryogenic milling, digestion,)

• Determine appropriate tests for parts and
  materials

• Supplier inspection to ensure substance
  concentrations remain under thresholds

Incoming Inspection
Part Collection
Testing

• Obtain part from supplier, inventory, etc.

• Test using appropriate procedure (see below)
• Document, review and publish test results

• Screening of incoming parts (from supplier,
  inventory, etc.)

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Due DiligenceTesting Cost-Accuracy Trade-offs
High ()
Suitable for part-qualification and analyzing
issues found in screening
A
C
A Lab PBBE, PBDE B Lab Pb, Cd, Cr, Hg C Lab
Cr VI D XRF Pb, Cd, Cr, Hg
B
Cost
D
Suitable for screening
Low ()
High
Low
Accuracy of Test

• Lab-analysis typically requires sample
  preparation
• XRF mostly suitable for exposed materials
• Both XRF and Lab-analysis require skilled
  technicians and industry standards test procedures

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Compliance Trends from Projects Likelihood of
RoHS substance occurrence by commodity (based on
testing)
Pb
Pb
5
5
Hg
PBB/PBDE
Hg
3
0
PBB / PBDE
0
Cd
Cr06
Cables - especially PVC sheathing
Cd
Cr06
Likelihood of Occurrence 5 Frequent 3 Possible 0
Not likely
Note must be mindful of exemptions and
evolving exemptions
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Compliance Trends from Projects Likelihood of
hazardous substance (based on material
declaration Electronics Parts)

• Lead, TBT, Cadmium, Nickel, Brominated Flame
  Retardants are primary hazardous substances that
  are found in electronic/electrical parts
• Its important to track these are regulations
  evolve and include more substances than the RoHS
  Six.

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Compliance Trends from Projects Likelihood of
hazardous substance (based on material
declaration Mechanical Parts)

• Many identified hazardous substances are present
  in non-electrical/electronic parts

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Information Availability Timelineneeded content
and capabilities
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Compliance Trends from ProjectsPart compliance
in projects
6
No Information
74
Compliant Replacement
46
RoHS Compliant
48
RoHS Non-Compliant
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No Compliant Replacement

• Almost half of the parts processed are not
  RoHS-compliant this number is dropping
• Only 74 of those have a compliant replacement
  specified these replacements will need to be
  qualified
• Non-compliant parts without replacement dictate
  detailed part research and qualification

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Compliance Trends from ProjectsInformation found
on the web
70
70
60
50
40
40
30
25
20
10
15
0
RoHS Compliance
Detailed Material Content
Replacement Part and Manufacturing
Certificate of Compliance
Electronic parts make up most of the parts here
mechanical parts have much lower numbers
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Compliance Trends from ProductsSuppliers of
mechanical parts coming-up to speed
Yes
2
Yes
No
50
50
No
98
Suppliers of Mechanical Parts
Suppliers of Electronic Parts
Suppliers requiring education during the sourcing
process (estimated)
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Compliance Trends from ProjectsCompliance
information on FIRST logic checks
77
Compliance blank
38-
Fail
22
62
Inconsistent or missing substantiating info.
Pass (or minor issues)
1
Misc. inconsistencies or missing substantiating
info.

• Need process to identify compliance information
  inconsistencies and lack of substantiating
  information
• Must pursue manufacturer for clarification
• Typically need several manufacturer follow-ups
  for clarification

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HAZMAT Panel Top Insights2003 - 2006
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Compliance State of the Industry

• Extreme urgency to plan and execute now
• Cost of Compliance is higher than expected
• RoHS yes/no is not an acceptable due diligence
• Expect expansion in material declaration
  requirements beyond the RoHS six Develop a
  strategy that supports world-wide compliance
• Assess your risk vs. strategy to determine
  appropriate due diligence
• Corporate strategy based on a multi-functional
  decisions that includes legal consul
• Leverage compliance for competitive advantage or
  brand protection
• Use compliance legislation as a catalyst to
  implement process change and improve performance
• Verification is needed for compliance confidence
• Use learnings from SOX best practices and
  participation with industry consortiums
• Expect business challenges in managing through
  the transition period such as supply variability,
  compliance visibility and change management
• Improve collaboration to effectively tackle the
  transitional challenges

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• Thank you.