When it comes to the lead-free RoHS (Restriction of Hazardous Substances) directive, good things do not come to those who wait. This directive, which severely limits the use of six hazardous substances - including lead (Pb) - in products shipped to the European Union (EU), is set to take effect in July 2006. Similar requirements will appear in China, Taiwan, Japan, and elsewhere throughout the world. Companies are fully accountable for ensuring that their products sold in Europe are compliant. According to the UK government, "Failure to comply with the requirements of the UK's RoHS Regulations will result in the removal of manufacturers' products from the market place." Although this is just the UK, the same applies throughout the European Union.
If your company is like most, you will likely face challenges along two key dimensions: (1) component level and manufacturing process compliance, and (2) supply chain and inventory transition. In the former, the challenges are to understand how you must achieve compliance, identify compliant replacement parts, and define a redesign and re-qualification plan where necessary. The key is to manage this process with cross-functional participation to ensure that costs are kept to a minimum and non-compliance risks are mitigated.
On the supply chain front, the transition to RoHS compliant components and processes has the makings of a "perfect storm." Anyone that has had to manage a tricky product transition knows the precarious balance needed to make everything stop and start smoothly. Now imagine, thousands of companies, with thousands of component suppliers, working through multiple contract manufacturers and distributors, all trying to make the transition in the next year.
In order to ensure a seamless transition, you should be taking the following four steps to protect your supply chain:
1. Understand the impact to your products and your business processes. RoHS and its imitators will change the way you select suppliers and select components. After July 1, 2006, instead of causing only supply chain and production issues, selecting the wrong part or wrong supplier can have legal consequences as well. Identify and review the processes and systems you use to select, qualify, and manage suppliers and parts; then define and implement changes that will ensure that you avoid non-compliance. Identify those products that will be shipped to affected countries after July 1, 2006 and put in place redesign and re-qualification plans.
2. Identify the compliance status of the parts you're currently using in these products, and get started with redesign. Contact the manufacturers regarding their parts' compliance, availability, and production plans. Some suppliers, especially smaller ones, have not yet developed their product transition plans. Understand the supply base, and where you can turn for sources of supply that will meet your engineering and production requirements. If a part is designated as "compliant," ask for supporting evidence. "Because my suppliers told me so" is not considered due diligence if you are asked by the enforcement authority of an EU country for proof that your product is RoHS compliant. Finally, do not forget that "RoHS compliant" is not the same as "Lead-Free compliant". The former refers to material composition; the latter to the component's ability to withstand the higher temperatures (up to 230°C) of lead-free SMT reflow and wave solder. Consider whether or not you'll have to determine the reliability of the redesigned product; lead-free solder is not a "drop-in" replacement for tin/lead solder.
3. Develop an inventory strategy to facilitate the transition. We all know how difficult it can be to plan just the right amount of inventory when a product becomes obsolete and a replacement product takes its place. Under-plan and you risk revenue shipment; over-plan and you end up with excess inventory. The same concept applies in RoHS only on a much larger scale. At the product level, you need to make sure that you have a clearly defined transition roadmap based on where you products are in their lifecycle relative to the July 2006 deadline. At the component level, you must define how much of the older, lead containing parts you need to ensure continuity of supply until your transition or obsolescence date arrives. In parallel, you must also define the quantity of the lead-free parts that you must secure for your future production requirements. Keep in mind that other OEMs - particularly the larger ones - are racing to secure the limited inventory of the existing parts as well reserving capacity of the lead-free parts as they roll off of the manufacturing line. And then there is the issue of spare parts, for which you must retain records to ensure that your lead containing spares are shipped only to support product shipped before the July 2006 deadline.
4. Verify compliance throughout your supply chain. As the quote goes, "In God we trust; all others bring data." It is important for all links in the supply chain to confirm and validate that their upstream suppliers' manufacturing and business processes are RoHS compliant. OEMs, in particular, should be most sensitive to this given their sole accountability for compliance. It is imperative, therefore, that they qualify: a) the manufacturing process to ensure proper safeguards for on-going compliance, particularly in the case of small to mid-size suppliers, and b) the supply chain business processes that keep non-compliant parts from slipping through the cracks and on to the manufacturing floor. In higher risk areas such as China where occasional issues have emerged with counterfeit parts, this validation is even more necessary.
Although July 2006 is more than a year away, the aggregate lead-times and the planning time associated with this transition leaves little to no cushion. The end result of delayed planning or poor execution will increase the risk of bad publicity and lost revenues.
Symphony Consulting
(www.symphonyconsult.com) and
Design Chain Associates (www.designchainassociates.com)
have partnered with each other to deliver an end-to-end, one-stop shop, RoHS
solution that addresses both the design chain and supply chain issues. If
you need help in ensuring a timely and well thought-out transition, please
contact us.