Product compliance - "SVHC" for the Manufacturing Industry Value chain!
As I walked out of the discussion on strategies to adopt for managing compliance, the regulatory influence of RoHS, REACH, WEEE in manufacturing industry still occupied my thoughts. The discussion had clearly established how Product compliance had become a "Subject of Very High Concern" for the Value Chain. With increased awareness among the customers and stricter regulatory implementation, the Product compliance has indeed come on priority list of CXOs. The risks are real
· Impact on the Brand including loss of customer confidence
· Denial of access to markets
· Increased Risk exposure of the portfolio of products
· Cost that could turn manufacturer unprofitable - cost of delayed NPDI; Obsolescence costs due to discontinuation of non-compliant parts, supply chain redesign...and more
Well, now It is no longer just the 5 substances in RoHS, The regulatory introduction and evolution seems to be outpacing adoption in manufacturing industry with newer ones on horizon - RoHS2, Conflict minerals, EU Battery directives and expanding list of the SVHC (substances of Very High Concern) in REACH.
So what makes "Product compliance" in manufacturing industry difficult?
Host of factors indeed...
· Compliance is determined by all the value chain players, much beyond the control of a single organization
· Frequent updates to regulations and associated interpretation issues
· The requirements have moved beyond "Yes/No" compliance confirmation from suppliers and new mandates require OEMs to provide time binding disclosure of substance information
· Overwhelming data - Continuously changing part information due to change and new parts, disparate data requirements coupled with complex calculations and roll-up needs
· Short Product lifecycles and increasing complexity of BOM configurations
· Sustainability issues buried deep down in the supply chain as in case of "Conflict minerals"
· Lot of manual interventions as process maturity and IT systems are progressing (stds like IPC-1752a) to adapt
...and this all costs money
How is compliance impacting the value chain?
Product Compliance touches various value chain processes and necessitates collaboration among players.
While choice of material, reduction in weight are introduced during product design, choice of "green suppliers" has bearings on procurement and outsourcing, Target markets determine packaging and labeling , warranty and collection obligations influence logistics (including reverse logistics).
Moreover the unbundling of product value chain adds complexity further increasing chances of non-compliant product introduction. Take example of High tech - the players in the chain includes OEM, semiconductor, distributor, contract manufacturer/EMS or ODM company and each one has a play in determining the product compliance
The corrective action for non-compliance could also spread across resulting in Product re-design, look-out for substitutes, alternate supplier development effort, stop shipment, Obsolescence of inventory, Recall of product and more
Has the case for "Full Material disclosure" (FMD) approach become stronger?
Generally speaking it seems to be the case. Increasing data extent, data collection need, validation against multiple specs and building a common understanding of the regulation across value chain has become vital to deliver a compliant product.
However there are multiple other factors that are shaping enterprise response ...
· Regulatory mandate and demand from market
· Extent of data to collect - data requirements keep evolving adding on to "what information" to collect
· Confidentiality and IP related issues
· The cost involved - both administrative costs and corrective action costs
FMD approach when extended further also leads to topics of creating and leveraging industry wide data sources like IMDS for automotive.
Some determinants for the Product compliance enterprise IT strategy...
The solution obviously requires an Enterprise IT strategy towards compliance, given the bulk of the challenges are in "Information" domain across the value chain. The solution footprint needs to span across enterprise applications enabling touch points to processes in CRM, PLM, SCM.
It is also clear that a good solution demands capabilities of data hub, flexible rule engine, analytics and reporting to manage multiple facets of compliance. Given the value chain set-up, the need for security, access, and standards based data exchange has become even more evident. Various Enterprise application providers are now offerings some capabilities addressing parts of this challenge
As this discussion continues to evolve, what remains beyond doubt is that it is time to think strategically about this Subject of Very High Concern.