Achieving WEEE and RoHS Compliance Within IBM s Integrated Supply Chain
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1 Achieving WEEE and RoHS Compliance Within IBM s Integrated Supply Chain Jackie Adams, Manager, Global Procurement Engineering, Center of Competence, RoHS Engineering IBM Integrated Supply Chain
2 IBM s Integrated Supply Chain 19,000 employees at 100 locations in 61 countries worldwide Operates 16 manufacturing plants in 10 countries Is accountable for approximately $40 billion, or roughly 50%, of IBM's total cost and expense Moves more than 2 billion pounds of machines and parts annually around the globe Handles more than 78,000 products, with over 3 million configurations 45,000 business partners worldwide 35,000 suppliers worldwide IBM Integrated Supply Chain was named one of the 5 best by AMR Research in
3 Thousands of IBM Products will be Compliant 3
4 Changes to IBM s Integrated Supply Chain Before RoHS INTERNAL FOCUS Cost/Quality Logistical Optimization (Geography Sourcing/Resources Standards Requirements Contract Efficiencies Supplier communication Innovation in Technology IT Solutions Forecasting FUNCTIONAL OPTIMIZATION Meeting Specification Requirements Standards Testing (IEC) / Supplier and Limited In-House Environmental Management System Multiple Suppliers Limit Niche Suppliers/Single Source Testing infrequent (Dev sourcing) Logistical locations SUPPLY CHAIN STRATEGY Emphasis solely on supply chain operations and performance. COST-CUTTING Value primarily by saving money and converting cash. MANAGES PROBLEMS Fights fires; does heroic things to meet client demand with little regard to business impact. Readiness RoHS INTERNAL FOCUS Cost/Quality Logistical Optimization (Geography) Directive Requirement Standards Requirements Contract Efficiencies Supplier communication Innovation in Technology IT Solutions Forecasting FUNCTIONAL OPTIMIZATION Material Declarations Standards In testing (IEC) / Supplier and In-House IT Solution for End to End Environmental Management Multiple Suppliers Limit Niche Suppliers/Single Source Testing (Procurement sourcing) Logistical locations SUPPLY CHAIN STRATEGY Emphasis: Supply Chain ability Meet Requirements COST Parity Proactive design of effective management system 4
5 Technical Challenges Risk Type Affected Areas Activities Required HIGH LOW Pb/PbFree Components ECAT Process (Mixed/PbFree) Raw Card Product Reliability Cables & Connectors Tape/Tape Libraries Drives - HDD, FDD, ODD Power Suppliers (On Board/Box) LCDs Monitors Plastics Sheetmetal Air Moving Devices/Heatsinks Fasteners ECAT Development Raw Card Development Define Reliability Fundamentals Data Loading (explore) Increase Standards & Consortia Engagement RFI (Building C&C Database) Data Loading (explore) Engineering Assessment of Supplier Qual / Reliability Plans Data Loading (explore) Supply Chain Logistics (i.e., Eliminate Old Inventory w/o Scrap Cost) 5
6 Driving Force for Integrated Supply Chain Changes The global impact of RoHS is forcing adaptation and invention by the ISC. Companies are: Revisiting traditional processes; Revamping management systems; Verifying supplier readiness and capabilities; Redesigning processes with environmental stewardship (especially RoHS) as the necessary mindset. 6
7 Clarity/Enforcement of Directive The failure of a producer to be able to demonstrate compliance of their products could result in the products being banned from sale in the EU Companies need: To understand Enforcement Expectations Laws to be closed in all member states & adopting geographies Clear interpretations of the Directive Possible Ramifications (tangible and intangible) Loss of revenue Reputation Customer confidence 7
8 Proactive Actions Supplier Readiness / Technologically and Logistically Increase Investments in Consortia and Product Identification and Availability IT Infrastructure Aligning in Automated processes for efficiencies Materials verifications to compliance Preparation and Training of their Design Centers, Engineers and Logistical Personnel 8
9 Suggested Supplier Declaration Strategies Declarations for ranges of products (i.e., one declaration applicable to products of a common type.) Once adequate supplier process control has been established for lot to lot variations, separate declarations may not be necessary. Periodic compliance certifications (fixed calendar interval or fixed product quantity) to maintain confidence in product supply chain. Even if the producer has agreed to a monitoring plan, supplier must be able to provide from it s own records, one declaration per P/N by batch or lot to support a product level audit. A separate materials declaration and formal change notification would be required if the supplier makes any change to the production process, the materials set, the form, fit or function of the supplied part. 9
10 Declarations of Compliance Equipment producers will need to obtain materials declarations or certificates of compliance confirming RoHS from suppliers, sub suppliers and/or subcontractors. Today this is in multiple formats No formats have been adopted industry wide. The InterNational Electronics Manufacturing Initiative (inemi ) has one recommended format currently out for review/approval A previous IBM environmental form was updated to include RoHS substances. It will be used until an industry standard is generally accepted. At a minimum, any declaration of compliance must state that the materials, parts or components in question may be used to produce RoHS compliant equipment with all data reported on an individual constituent material basis not whole components. 10
11 Communicating RoHS Requirements Internally Compliance of the mfg supply chain is a prerequisite to a RoHS Compliant Product All suppliers of components, commodities, and mfg service must be informed via supplier notification packages describing your RoHS requirements. Dear Supplier Communicate All engineering and sourcing documentation, statements of work and contracts must clearly reference corporate environmental guidelines and controlling specifications for RoHS Compliance. 11
12 Collaboration An Effort Moving to the Forefront Integrated Supply Chain must actively collaborate with: Industry consortia (inemi, HDPug, IEEC, CALCE TM, etc.) Leverage wide range of Research & Engineering Capability Drive Standardization, Testing and Communications Supply Base: Invoke strict Tier 1 and Tier 2 readiness Consolidate to help drive the Tier 3 supplier inemi is a registered trademark of International Electronics Manufacturing Initiative, Inc.; CALCE is a trademark of CALCE and University of Maryland; HDP User Group is a registered trademark of High Density Package User Group International, Inc. 12
13 Product Compliance Verification IBM will maintain product compliance through a rigorous control process within the supply chain that services all product manufacturing. The process is a combination of both IT and manual checking. 1. IBM will obtain materials declarations for all individual components and sub-assemblies, as well as carry out selected compliance analyses. Once submitted to IBM and confirmed, the declared data will be logged into the IBM i2 explore parts database for each part number in the system bill of materials (BOM). 2. Using an application from Synopsis, IBM engineers can create an itemized BOM by part and/or supplier that cross references with the i2 explore parts database to further ensure compliance 3. In addition to IBM s existing product design stage gate process, which determines which products and services have the greatest market potential and controls the release of products to market, a stage gate process will create a checkpoint to review the BOM to ensure that it meets RoHS compliance. 4. Once the product is made generally available, IBM plans random sample tests of materials, components and assemblies. This may vary from manufacturing sites around the world. 13
14 Compliance Using Integrated Product Design External Internal 2006 Web Page Autoloader DFS Validation DFS Yes Yes Suppliers Accept MDC explore No Product Manager Brand Rep/Procurement DataMart 9 7 EMARS BRIO Queries Queries Brand Commodity Report Projected for 2006 Materials Declaration Reduced resources Connected with emars By Synopsis Projected for 2007 RosettaNet Maximized resources Compliance Reports a. Corrective Actions b. Declaration Document epep Post Check Process 14
15 IBM RoHS Product Roadmap Q Q Q Q Building Blocks Overall Plan Product A Product B Product C Product D Product F Product G Product H Product I Key: Red No Plans for RoHS Compliance Yellow Phasing in RoHS Compliance Green GA as RoHS Compliant before 7/1/2006 Split Release as RoHS in EU, Non RoHS in Other Geo s Green Yellow Hash Lines, represent selective OEM or no Commit Dates All HW Commodities effected not including some plastics and components not already compliant 15
16 Summary Best Decision may be a Cautious Decision Some Suppliers & OEMs are loosely interpreting the Directive Allows for no reaction time should the EU not support these loose interpretations Costs may be excessive to some suppliers or producers Technology Challenges (Effects) Reliability an issue for consumers, as well as, big business Interpretation of Server Exemption for Critical Customers, where business is relying on efficiency, quality and consistency Point of Sale machines, SMB (Small to Medium Business) Resource Struggles for Smaller OEMs & Suppliers (Tier 3) Inability to support: multiple material declaration methods & IT infrastructure Limited participation in consortia groups. Push for Collaboration! 16
17 Questions? LH Chew
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