RoHS -- Don't Ignore The Opportunities

Initially viewed as costly burdens, regulatory requirements like RoHS are now emerging as competitive tools for manufacturers.

For manufacturers, meeting the European Union's July 1 Restriction of Hazardous Substances (RoHS) compliance deadline was the easy part. The tough part will come from the effort to maximize the strategic, competitive benefits.

Start by realizing that meeting the RoHS deadline was the beginning, not the end of the compliance process. Look at compliance as an on-going process, not a project, emphasizes Ken Amann, director of research with CIMdata, an Ann Arbor, Mich.-based analyst firm.

For manufacturers, the rapidly emerging compliance "game" can bring new competitive success if they play it right, says Tom Maurer, global marketing director, high tech and electronics, with UGS, a provider of product lifecycle management (PLM) solutions. UGS and other PLM providers, such as Dassault's ENOVIA MatrixOne, Agile, Arena and Ariba, see PLM as a key factor in the compliance equation, observes Amann.

Maurer says the winners will be those manufacturers who recognize that hazardous substance directives like RoHS are also business change agents that require new corporate-wide strategies, not just compliance reporting. PLM providers, says Amann, have an edge because their solution concept is a strategic approach to dealing with products, from conception to disposal in the field.

Companies that view environmental compliance as only a reporting issue face recurring costs and increased risk that arises from late-term changes, manufacturing process delays and slow market launches, Maurer observes. Without new strategies, pre-compliance business processes will endanger customer satisfaction as well as market retention and growth. Some of those new compliance-inspired strategies, he notes, involve and coordinate functions from product design to marketing.

Current And Pending Restricted Substances Regulations

For manufacturers of electrical and electronic equipment, restricted substances compliance reaches far beyond EU RoHS. Below is a list of regulations that will go into effect over the following year.

For more detailed information visit www.ul-rscs.com to read "A Summary of Global Restricted Substance Regulations."

Restriction of Hazardous Substances (RoHS), European Union
Effective date: July 1, 2006

JIS C 0950 (J-Moss or Japan RoHS), Japan
Effective date: July 1, 2006

Waste and Electronic Equipment Directive (WEEE), European Union
Effective date: December 31, 2006

The Electronic Waste Recycling Act (SB 20/50), California, United States
Effective date: January 1, 2007

Article 11 (China RoHS), China
Effective date: March 1, 2007

Registration, Evaluation and Authorization of Chemicals (REACH), European Union
Effective date: spring 2007

The Act for Resource Recycling of Electrical/Electric Products and Automobiles (Korea RoHS), South Korea
Effective date: July 1, 2007

Directive 2005/32/EC on the Eco-Design of Energy-Using Products (EUP), European Union
Effective date: August 11, 2007

Japan Green Procurement Survey Standardization Initiative (JGPSSI), Japan
Effective date: voluntary

The resulting change process shouldn't come with a conventional deadline mindset, explains Greg Monty, director of technology, restricted substances, Underwriters Laboratories Inc., Northbrook, Ill. "Environmental compliance isn't a project that manufacturers can ever be 'done with,'" he adds. "With restricted substances regulations becoming more commonplace, manufacturers will have to make compliance an essential element of their business activities and have systems in place to meet the requirements in all major markets." His point: With environmental/hazardous substances regulation becoming a growing characteristic of global trade, corporations need to stop treating such restrictions as solitary one-time events.

"It's time to organize for success," adds Maurer. He wonders how much of the oft-cited regulatory compliance costs -- 1%-3% of revenue -- is really the result of not establishing an effective corporate strategy. "And if a manufacturer is experiencing that much of the cost of compliance, shouldn't there be management-established controls and strategies?"

According to Monty, "Without a management-led restricted substances strategy, manufacturers run the risk of losing opportunities in key markets." He emphasizes the principle of knowing your markets -- and the range of regulatory compliance required. Regulatory change is also part of Monty's argument for a formal corporate oversight strategy on regulatory compliance.

Also dramatizing the need for high level corporate attention is the rapidly growing number of environmental regulations. For example, Maurer counts 37 RoHS category bills in U.S. state legislatures. The global proliferation (see sidebar, "Current and Pending Restricted Substances Regulations") includes China's Article 11 (China RoHS), Korea RoHS, Japan's JIS C 0950 and California's SB 20/50.

While that growing complexity might suggest the solution of entirely outsourcing compliance, UL's Monty says that degree of separation isn't feasible. Instead, he describes third-party partnering as an effective alternative for compliance-challenged manufacturers. These partners (UL is one) can help manufacturers deal with the evolving compliance complexity, says Monty. For example, UL has a membership status in working groups developing testing standards for hazardous substances. UL also has a leadership role in the EU's RoHS Technical Action Committee.

PLM continues to get high marks as a compliance solution because of its organizational process focus. "The growing need for companies to comply with a wide variety of regulatory requirements creates new and difficult challenges that can distract an organization from adding value to its products, yet achieving compliance is essential to protecting the value of its innovation," says Jim Brown, vice president, global product innovation and engineering, with Boston-based analyst firm Aberdeen Group. "Our research clearly indicates that companies who can proactively build regulatory compliance into the design process by employing compliance-enabling PLM technologies have a real business edge on their competition."

According to a recent report on product compliance developed by Aberdeen, "Leading companies are adopting organizational approaches that encourage compliance, measure compliance performance more frequently and use appropriate enabling technologies to support designers in the right compliance choices at the point of design."

The report also points out that these same companies are "moving toward identifying and meeting compliance requirements early in the product design process" and achieving significant results:

  • 27% product-recall reduction;
  • 15% reduction in design failure rates;
  • 31% improvement in the number of products in compliance.

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