Technology Forecasters, Inc.
Strategic Environmental and Manufacturing Consulting
There have always been tradeoffs when devising an effective internal numbering system for electronic parts; hazardous substance restrictions make things even more difficult. Some clients have reached wits’ end over part numbering challenges created by the European Union’s Restrictions of Hazardous Substance (RoHS) Directive and similar regulations.
Some OEMs are trying to solve the problem by bringing all products to the highest level of environmental requirements as soon as possible, and keeping parts numbers the same. That’s easier said than done. Others are adding a suffix to each part number, such as 001 or 002, to indicate EU RoHS compliance level. But sales staffs often resist customer-facing part-number changes, and what about RoHS requirements from elsewhere?
RoHS is evolving with significant regional variations. From the narrow perspective of part numbering, we’d all be better off with one globally consistent standard, but no one expects that anytime soon.
The restrictions won’t end with the six substances covered by the EU RoHS Directive, which took effect July 1, 2006. Norway, for example, has proposed a regulation aimed at consumer products that would restrict 18 substances. Europe’s new Registration, Evaluation, Authorization and Restriction of Chemicals Regulation (REACH) may end up restricting a dozen or more substances per year starting as soon as 2010.
With the varied restrictions, suppliers either will need to target product designs for specific locales, or target parts that can be used globally - and identify those with an issue. Most OEMs won’t want to target product designs for specific locales so flagging issues with a part may prove to be the best approach.
This could be accomplished by flagging at the internal part number (IPN) level. The flag will need several values. OEMs will need to determine what the values are for different BOM levels (component parts vs. finished goods, for instance) then incorporate those into business processes (part selection, etc.).
It is not clear that any PDM or PLM software vendors have fully grasped the data management complexities of this or whether their tools are capable of doing what will need to be done.
Unfortunately we’re dealing with a moving target. What conventional wisdom accepts today as the best practice may not be best in the long run. How best to deal with this matter at any level, part through finished product, is still a big To Be Decided. What has worked for you?
Electronics OEMs doing business with the federal government are already steeped in the accessibility rules for that market. But the market for accessible products appears to be broadening, putting design for accessibility on the agenda at many other OEMs.
First some background.
In 1998, Congress amended the Rehabilitation Act to require federal agencies to make electronic and information technology accessible to people with disabilities. According to the government’s Section 508 web site, the law was enacted “to eliminate barriers in information technology, to make available new opportunities for people with disabilities, and to encourage development of technologies that will help achieve these goals.”
In addition, Section 255 of the Telecommunications Act of 1996 requires makers of telecommunications equipment and providers of telecommunications services to ensure that gear and services are accessible to persons with disabilities, if readily achievable.
Companies that sell services to the government and organizations that take federal money for research or other efforts, must also comply with these laws.
Leading organizations of disabled persons are lobbying for more accessible products, including cell phones, which are exempt under the 1996 telecommunications act.
Increasingly, the market for accessible products is broadening.
“There is growing demand,” says Danny Salinas, leader of product stewardship, who is responsible for design for accessibility and environment at Nortel Networks Corp. “It is starting to proliferate outside the federal government.”
Salinas cites several examples: Universities; the Canadian government, which is considering a U.S.-like law (Nortel is based in Canada); and states applying the federal rules and/or considering statutes. Some companies not in any way governed by federal rules are beginning to consider accessibility a trait of good corporate citizenship, he adds.
“Industry is paying more attention,” Salinas says. “In Nortel we have the disabilities business council that focuses on hiring disabled persons and so accommodating them whichever way we can to get these talented people into our population.”
There are 60 million people in the U.S. with some kind of disability, and about 600 million worldwide, Salinas says.
With no end in sight to the corporate talent war, companies can ill afford to exclude disabled workers because the work place does not offer accessible products.
Done properly, Salinas argues, design for accessibility does not - and in fact should not - add cost. With the right processes in place, engineers consider accessibility in the early stages of product design much in the same way they consider usability features.
Salinas believes - and we agree - that OEMs not already considering accessibility ought to add it to their design agenda.
What has been your company’s experience with the design for accessibility issue?
Green is green. That’s the central message corporate environmental champions need to convey to executive decision makers to get the green light for green projects.
By that I mean, products, processes and facilities designed to conserve resources typically save money, reduce costs and in some cases generate revenue. That’s why I named my book, “Lean and Green: Profit for your Workplace and the Environment.”
As I have written in the past, and emphasized again in a recent podcast, executives are completely - and properly - motivated by shareholder value. The best way to communicate green ideas - better product design, more efficient facilities, better process in manufacturing, even natural landscaping - is to demonstrate how they’ll save money, or increase revenue. And measuring financial benefits - and the financial risks of not being proactive in this area - can now be done with standard accounting models.
For a good example, read an article written last year by Bill Roberts, who now writes regularly for TFI, about Texas Instruments’ latest wafer fab. Through sustainable (green) design, TI expects to cut yearly operating costs as much as $4 million. That’s how TI’s green champions sold the idea to the decision makers.
Once green initiatives are adopted and implemented it is also imperative to measure the improvements so executives - and everyone - can see the savings. Then they will be motivated to continue in the lean and green direction.
The central truth about lean and green: What’s good for the environment is good for profits.
Write and tell us your experience in convincing executives to go green
For my book, “Lean and Green: Profit for your Workplace and the Environment,” I asked environment champions at 17 environmentally innovative electronics companies if their companies were doing all they could to go green.
Their responses were startling.
At a large semiconductor company, the champion said they will be green enough when all they need to make semiconductors is sand and water. At an OEM, the champion said they will be green enough when the only things that leave the facility at the end of the day are finished products and employees.
At company after company - among them Apple Computer, Agilent, Celestica, Intel, NEC, Sony and Texas Instruments - the story was the same. Each is highly innovative in going lean and green, but each champion said his or her company could do more.
There’s a bottom line reason why these people set a high bar. They understand the central truth about lean and green: What’s good for the environment is good for profits. They long ago cast off myths about green costing instead of saving money.
Green enough is bound to vary from company to company. One measurable standard is zero waste. Several companies have embraced zero waste. In my book, one company explained zero waste this way: Zero contributions to landfills.
That means anything that comes in the door must be scrutinized to make sure it can either go entirely into products or be composted, reused, recyclable or returned to the vendor. This takes some discipline, but once a company establishes it, the cost savings are enormous. And the pride that employees and shareholders can have about being a zero waste company is immense.
Our web site has many resources for green and lean. And I recently did a podcast on the topic.
Next week I’ll blog on how to sell green initiatives to top executives.
Until then, we’d like to know: What would be green enough at your company?
Voluntary carbon offsets are a minor but useful item in the tool kit for reducing greenhouse gas emissions. Their value is mostly symbolic, a way to raise awareness and to make a statement about one’s commitment to reducing emissions.
Families, individuals or companies can buy voluntary offset credits from any of several private companies that direct the money (minus a commission) to wind farms, solar installations and other projects that reduce carbon emissions. The idea is, if you pollute in one place, you can theoretically reduce your net climate impact by buying credits and contributing to energy efficient projects somewhere else.
I agree with those who think this is a pretty good idea, if only because it makes people aware of the carbon emissions they are creating. I don’t entirely agree with the critics who scoff at the notion as no better than the indulgences that the Catholic Church sold during the Middle Ages, but I can see their point.
Voluntary efforts should not be confused with the rigorous carbon cap and trade programs now established by the European Union and elsewhere under the Kyoto Protocol. The EU has the most rigorous program I know. Each business must meet an assigned carbon emissions cap. Companies that do better than the cap can “sell” the unused portion of their caps, for whatever the market will bear, as credits to companies that aren’t meeting their goals. There are stiff financial penalties for non-compliance.
I would prefer to see engineers everywhere act voluntarily to aggressively innovate design-for-environment features in all sites, products and services. But we’re not seeing significant movement in that direction yet, and time to reduce environmental degradation may be running out. So, mandatory cap and trade programs are likely to be among the more successful methods for lowering emissions until we develop technologies to dramatically reduce our use of carbon-emitting fuels.
In contrast, voluntary carbon offset programs are a partially effective, temporary measure toward reducing emissions, mainly because they raise the consciousness of executives, companies and individuals to the measurable costs of polluting.
For example, when we were helping one of our clients to elicit Lean and Green ideas from employees, one of the first responses was that the company should buy carbon offsets. This suggests that electronics executives need to know about voluntary carbon offset credits and develop an opinion on them.
The issue of offsets was brought to my attention by Saxton Rose, the creative director of TFI’s Web site, after he had read my blog on green wash several weeks ago. Voluntary carbon offsets do have the potential to become another form of green wash with more PR benefit to the adopting company than any real impact on the environment. I would not excessively praise companies that adopt voluntary offsets, especially if that is the sum of their green efforts.
If you want to learn more about how to reduce the environmental impact of your company and its products — and increase profits at that same time — then attend our September Quarterly Forum in Ottawa, where we will have a briefing and panel on Zero Waste in the electronics industry. To learn more about this and TFI’s other Lean and Green services follow this link. www.techforecasters.com/consulting/environment/
As an early proponent of going lean and green, I have been gratified to watch the corporate environmental sustainability movement accelerate in recent years. To the extent that electronics companies pursue real objectives to reduce inefficiencies, power usage and waste byproducts, I am optimistic that the industry is moving to reduce risk and capture opportunity.
I am sometimes dismayed, though, how many companies appear to be mostly interested in the PR buzz they create by announcing green intentions. Too often, the press release covers too small steps and is followed by too little action. At TFI, we call this “green wash.” We’ve been known to turn down opportunities to work with companies whose management lacks genuine intentions for making bona fide progress on green and lean for sustainability and profit.
I hope green wash has less to do with cynicism and more to do with the corporate officers not really understanding what it means to competitively pursue economic and environmental sustainability. Based on TFI’s consulting services in this area, and based on the findings of my book, Lean and Green: Profit for your Workplace and the Environment (Berrett-Koehler, San Francisco, 2001), there are two criteria I use for judging lean and green versus green wash:
1) Having a well thought out system for measuring increased environmental efficiencies and the resulting ROI metrics, since one is to become more profitable through green. Companies that either have such metrics or are clear in their intentions to develop such metrics are not just green washing.
2) Having a strategy to rethink business models and product lines. Going green is a creative act, as creative as the product and manufacturing process innovation. Without the top leadership’s intention to pursue a creative approach to rethinking the business from a lean and green perspective, there’s not much hope they’ll get beyond green wash.
Maybe you can think of others indicators of real green intentions; please weigh in with your comments.
We are seeing some good examples of checklists and spreadsheets being created by innovative compiance managers to make products more recyclable and hazardous substance-free. Should companies share these tools? On one hand, some companies have worked hard to create these and they consider them to be competitive advantages. On the other hand, quality methodologies are shared widely and—just like quality—DfE rules benefit the whole industry. Sharing methodologies will foster alignment up and down the supply chain. Thoughts?
In our environmental consulting practice, we are finding that there is no clear role for the management of product environmental compliance — it is oftentimes blended with facilities EHS, which usually causes confusion. Our latest benchmarking report highlights this fact.
Doesn’t it make more sense to take a more holistic, strategic approach by bringing them together?
According to Technology Forecasters Inc. benchmarking studies comprising electronic-product companies and their suppliers, we anticipate that millions of non-compliant components will be stuck without products needing them. Likewise, hundreds of electronics companies with products not covered by hazardous-substance restrictions will face non-compliant-component shortages, delays, and increased prices. The Restrictions of Hazardous Substances Directive (RoHS) deadline was July 1st, and now the lion’s share of electronic and electrical products headed for the European market for sale should have no more than the maximum allowable percentage of six substances: lead, cadmium, mercury, hexavalent chromium, PBB, and PBDE.
Jim Smith, senior vice president of worldwide warehouse and distribution for major component distributor Avnet, said, “In some cases, sure you’ll see a glut of product. You’ll see people suddenly switch from non compliant to compliant and there will be a glut of that component.”
Toshiba America Executive Vice President Stephen Marlow said, “To quantify the magnitude of this issue [managing dual parts—compliant and non], US semiconductor consumption is approximately US$10 billion per quarter. A 10% miss in inventory planning related to RoHS transition, $1 billion of capital per quarter could be tied up in non-performing assets. Without absolutely clear, brilliant channels of communication, we run the risk of having too much of the wrong product at the wrong place at the wrong time.”
What are companies going to do with the excess inventory? Throwing these components into land fill would be antithetical to the global intention for reducing electronic waste. It’s not only the European Union that thinks that “land-filling” hazardous substances runs counter to human, environmental, and economic sustainability. Individual global companies (Nokia, Motorola, Sony, and more) as well as governments in widespread regions (several Canadian provinces and US states, China, Korea, Australia, and Argentina) soon will restrict these six and additional substances. Besides, since when has throwing away otherwise valuable assets been a good idea business-wise?
Wait – Don’t Pitch those Parts!
Quarterly Forum Member e-Certa offers a menu of options for electronic-product companies to (A) minimize purchases of excess non compliant parts, (B) access the non compliant parts they need and cannot find, and (C) deal with the remaining excesses in an economically and environmentally sound ways.
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