For APC, a division of Schneider Electric that makes power distribution systems, the speed in which the environmental regulations came down the pike created a massive challenge to revamp its tools and processes. On the eve of the 2006 introduction of the EU's RoHS legislation, the stakes were incredibly high. A full third of APC's product portfolio -- accounting for nearly $600 million of revenue from European sales -- was in jeopardy, because the firm lacked the proper paperwork to demonstrate compliance, according to Ray Lizotte, who came on board as director of its product stewardship office in 2004.
Unlike past regulations, which followed some sort of evolutionary path, the rules governing environmental compliance called for dramatic changes, Lizotte says. "With this level of compliance change, we had to develop whole new ways of conducting business. The old tools were not good enough. You were really talking about the new compliance requirements being game changers."
With Dassault Systèmes' ENOVIA Materials Compliance Central, engineers can view the material content information in the context of the product BOM and cross-reference the data against multiple regulations.
Historically, more than a few APC engineers would spend most of their time pushing paperwork to deal with the administrative burden around compliance, and that scenario was hardly sustainable going forward. By trading manual processes for a software solution -- in this case, InSight Environmental Compliance (now known as PTC's Windchill Compliance) integrated with a homegrown PLM system -- APC was able to collect and input nearly 60,000 pieces of data in less than 12 months and convert its entire product portfolio to meet its RoHS deadline and avoid any revenue loss.
In addition to the software tools, APC instituted new processes for collecting data from suppliers, and it built workflows that grab data from the Windchill Compliance platform and push it out to other systems (enterprise resource planning, for example). This makes the data readily accessible to non-engineering users, such as purchasing agents, who can then factor compliance information into their evaluation of parts and suppliers.
The software has definitely helped automate the compliance process, Lizotte says, but the constant change and increasing complexity around information demand a higher level of knowledge by the engineering team. "People who are managing the system are now having to delve into issues beyond their expertise. One of our ongoing challenges is around how to bring on a higher level of environmental expertise without burdening the process with lots of additional environmental people."
Harmonic Inc., which provides digital video hardware and software, also recognized early on that manual processes and spreadsheets were not going to suffice in terms of staying abreast of the moving compliance target. On top of an investment in Oracle's Agile document management system, the firm deployed ENOVIA Materials Compliance Central (MCC) from Dassault Systèmes to serve as a central and dynamic database to handle all its compliance data.
Implementing the software foundation was just one piece of the puzzle. Harmonic also updated key business processes around supplier management to ensure it was well situated to meet current demands and to respond to evolving regulations, according to Tamas Farkas, the company's compliance manager. Specifically, the firm modified its first article of inspection procedure so parts are approved conditionally, even if substance data is not readily available in the ENOVIA system. Final approval is granted only when the required material is compiled. This gives design engineers the flexibility to spec a part on good faith, Farkas says, without having to wait until all the data is compiled.
Your right about the chip makers, Rob. Unfortunately, the head start on compliance with ROHS didn't extend to some of the high-end embedded board makers, such as those producing single-board computers. There compliance and even understanding the details of the regulations, were all over the map. It took a couple of years for that part of the industry to sort things out.
The electronics industry did quite a good job of complying with RoHS. for one thing, the industry had a multi-year jump on the problem. Big suppliers like TI was fully in compliance years before the rules took affect. Major distributors such as Avnet, Arrow and Newark were able to quickly guarantee they could fill customer BOMs with compliant parts. It became a competitive issue among suppliers. That took a lot of the pain out of RoHS for the OEMs.
@Beth and @Dave, I don't wish to start a "Compliance is Evil" war, but I honestly do not know the purpose of the "dramatic changes" in compliance discussed in this article. I teach Systems Thinking to project managers and I am a devote of the Wharton School's late Russel Ackoff and this "Purposeful Systems". I would quickly support a massive regulatory push to document an industry that was producing dangerous products using environmentally-destructive processes. However, your article describes how Schneider Electric had 12 months to document 60,000 system components to remain in compliance with Restriction of Hazardous Substance (RoHS) regulations and avoid the loss of $600 Million in revenue. Schneider was able to "convert its entire product portfolio to meet its RoHS deadline and avoid any revenue loss."
This statement leads me to conclude that the entire supply chain involved with the $600 Million product line was not in any violation of the RoHS regulations. From a Systems Thinking perspective, what was the Purpose of the RoHS regulations? Did the authorities have reason to suspect that 80% of the products were Hazardous? 60%? 40%? 10%? 5%? If after compliance, 0% were found to be hazardous, of what purpose is the RoHS? What of the secondary Systemic consequences of less capital available for use on new research and product development? The building of new factories? The Discovery of New Business Opportunities and Customers?
I am all for Agile product and software development. But I'm leery of Agile Regulatory Development. Kudos to Schneider for developing an innovative electronic compliance system to address RoHS. One of the primary tenets of Systems Thinking is an awareness of the Change of Game. What is an appropriate level of effort to be consumed by regulatory affairs? After electronic compliance systems are adopted industry-wide, what are the next challenges in compliance to be met?
Thanks for the reference, Dave. I think approaching this from a systems thinking point of view makes a lot of sense. Not only does it give you that ecosystem perspective at a macro level, but also on a micro level, thinking about how parts are both assembled and disassembled when it comes to end of life.
It's good that these tools are out there. As the article points out, though, it's even more important to train engineers to start thinking about products from a life cycle perspective in the first place.
A good engineering education should train us in systems thinking, so it's just another step to apply this to environmental sustainability. If you have the mental tools to think about how a component fits into a subassembly and how a subassembly fits into a product, then you already have the mental tools to think about how a product (and the processes needed to manufacture it) fits into an ecosystem. MIT has a course called Systems Perspectives on Industrial Ecology, available on OpenCourseWare, which I found very useful. I would urge anyone who is interested in this topic to check it out.
As a matter of fact, there are many interesting engineering courses on OpenCourseWare, some with full video lectures. This includes a course by Dr. Ken Russell, who used to write Design News' "Calamaties" column. For those of us who didn't have the good fortune and/or financial resources to go to MIT, it's an incredible resource.
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