Evolving regulations introduce supply chain disruptions
Today’s products are more complex technically and commercially. They have more variants than ever before and are designed to support global markets. Along with complex products, many manufacturers have evolved to become less vertically integrated relying more and more on multi-tier, global partnerships for design and manufacturing. At the same time, the global economy and pressure from developing markets have forced them to adopt aggressive cost targets, continuously looking for ways to reduce cost, and try to manage unpredictable cost drivers such as wildly fluctuating commodity prices. All the while, manufacturing leadership faces exponential growth in product compliance obligations including regional demands, scrutiny on conflict minerals, sustainability targets, and hundreds of new environmental regulations annually.
Product environmental requirements are subject to change as new restricted substances are identified and existing exemptions expire. New mandates are now emerging that focus on energy use, carbon footprint, and other environmental metrics. For example, in December 2012, the number of Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) restricted substances increased by over 60%, from 84 to 138 substances, and in 2018 companies previously exempt from reporting will now have to register and report for existing companies that manufacture or import substances in low volumes. REACH 2018 concerns substances that are manufactured in or imported into the European Union (EU) above one tonne per company per year. The deadline for this registration is May 31, 2018. REACH’s list of SVHC (Substances of Very High Concern) also change approximately every six months.
The Restriction of Hazardous Substances (ROHS2) amendment in 2015 (Directive (EU) 2015/863) adds four substances to the existing list of six restricted substances under RoHS2. The directive will take effect beginning July 22, 2019 for all Electrical and Electronic equipment with the exception of Medical Devices and Monitoring & Control equipment, which will have until July 2021 to comply
Additionally, the U.S Conflict Minerals Law stands to have a tremendous business impact on manufacturers. Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act is a transparency measure, passed in 2010 and implemented by the U.S. Securities and Exchange Commission that creates a reporting requirement for all companies publicly traded in the U.S. with products containing any of the four conflict minerals (tin, tantalum, tungsten and gold). Companies listed on the U.S. stock market have until May 31st each year to disclose whether any Conflict Minerals are found in their products. And companies not directly regulated by the U.S. Securities and Exchange Commission (SEC) will be impacted too as audit requirements are pushed down through the entire supply chain including privately held and international companies. Due diligence on these substances includes supplier engagement, management systems, and addressing supply chain risks.
These changing regulations cause manufacturers to struggle to stay up to date with the mandates and poses significant risk to revenues. Being flexible in due diligence data collection will be key. The ability to tailor your PLM system to add in additional environmental compliance data collection requirements as they are mandated, allows you to stay on top of the efforts, and also allows you to be more effective in data recall for detailed reports.
The number of environmental requirements has grown significantly in recent years.
Address product & supply chain risks early with PLM
As suppliers respond to these regulatory and market forces, the availability, cost and even the viability of the components and materials companies purchase for use in products will be impacted. Being able to manage and mitigate these supply chain risks, providing both an early-warning system and data to support effective decision-making in design and production is critical.