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As outsourcing increases and new regulations such as REACH mushroom, electronics manufacturers are ever more dependent on their suppliers to ensure environmental compliance. As such, they find themselves working with more suppliers and collecting more compliance data then ever before. This, coupled with the fact that manufacturers continue to use manual processes, has made supplier management the 'Achilles Heel' of environmental compliance. Increasing adoption of Corporate Social Responsibility (CSR) principles (such as HP's SER program ) that go beyond environmental compliance issues, such as carbon foot printing, labor practices and packaging of products, have placed even further demands on working with suppliers.
The business impact includes operational inefficiencies, along with increased supplier risks associated with quality, non-compliance and time-to-market.
Companies must collect more than just the certificate of compliance for components from suppliers - managing compliance spans the entire supplier life cycle and the entire component life cycle. Frequently, this requires multiple departments - such as procurement, design and component engineering, quality and compliance - working collaboratively with suppliers.
There are several industry examples such as HP, Nokia, Dell and Sony that use best practices processes for managing Environmental, Health and Safety (EHS) compliance.
Over the last few years, comprehensive supplier management platforms have emerged that enable companies to automate these best practice processes.
Specifically, these best practices include a combination of following processes:
Risk-based assessments that enable companies to identify supplier risk. Typical criteria include supplier location, data from past interactions with the supplier, public information on suppliers and the nature of relationship (direct versus indirect procurement, high versus low volume, critically of the product line etc).
The use of self-assessment EHS questionnaires to collect additional data from suppliers and further identify risk (such as those used by Nokia and HP). This can include tracking certifications such as ISO 9001/14001, OSHAS 18001 and SA 8000. For lower risk suppliers, a satisfactory response to the questionnaire might be sufficient.
Suppliers who are identified as high risk are made subject to on-site audits. Frequently, third party auditors with local expertise are used. HP, Dell and Nokia use these audits selectively, while Sony requires all suppliers to go through Green Partner audit process before they can ship parts.
The use of an integrated corrective action management approach to ensure that any deficiencies are resolved in a timely fashion based upon the severity of the deficiency. HP provides a supplier 30, 180 or 360 days to resolve the issue based upon the severity. To foster open communication, best practice encourages identification of deficiencies and collaboration to resolve them.
Frequently assisting suppliers in need of implementing best practices at their sites. Capacity building includes sharing best practices - HP uses supplier training classes where real life case studies provide practical examples.
Taking into account Design for Environment (DfE) considerations, including collaboration on materials, packaging, energy efficiency and reliability data (such as tin whisker for lead-free).
As a part of Production Part Approval Process (PPAP), having manufacturers ensure compliance by getting component material declaration from suppliers. Material declaration can range from a simple certificate of compliance to a full disclosure of all the substances in a component. With new regulations popping up globally, companies are increasingly requesting full disclosure from suppliers. This enables them to identify the existence of a substance without having to go back to suppliers every time a new regulation comes into force. However, getting full disclosure is not easy for two reasons. First, suppliers frequently use proprietary materials in their components that they do not wish to disclose. Second, suppliers do not fully understand the composition of their component. They must get data from their suppliers on the composition of sub-components and materials used by them.
Companies can also collect lab reports and MSDS from their suppliers to ensure compliance. Often, lab reports must be refreshed periodically to validate that components continue to comply. Since lab reports are usually at homogenous material level, suppliers get this data from their material suppliers. Sony Green Partner Program certifies material suppliers and gets the lab reports directly from them, eliminating the need for component suppliers to provide lab reports for certified material suppliers.
The use of Supplier Scorecards that feature EHS compliance as one of the scorecard components can enable companies to make better sourcing decisions for new contracts.
These platforms provide project management tools to manage projects that involve hundreds of suppliers. A workflow engine manages business processes that span stake-holders across multiple departments. Expiration driven updates, along with ability to automate reminders and escalations ensures that nothing falls through the crack. Configurable dashboards and reports provide visibility and metrics needed to make EHS compliance an integral part of supplier performance management.
Besides improving productivity, these best practices can help companies reduce the risk of non-compliance and time-to-market delays, improve supplier quality and allow companies to promote EHS practices as a differentiator.
Balu Sharma is a seasoned Environmental Compliance and Supply Chain Management Professional with over 20 years of experience. He is also the founder and CEO of SupplierSoft (www.suppliersoft.com). He can be reached at balu.sharma@suppliersoft.com
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