Beyond Conflict Minerals for High Tech Companies

Transcription

1 Beyond for High Tech Companies Turn compliance into a competitive opportunity The facts are straightforward. The Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1502, requires organizations to disclose the use of conflict minerals in their products or in the materials used in their manufacturing processes. Conflict minerals are tantalum, tin, tungsten, and gold (3TG) originating from the Democratic Republic of the Congo (DRC) and adjoining countries (the conflict zone). When the mines and smelters in this region are controlled by warlords, their revenue ultimately funds violence and atrocities. (Note: not all 3TG from the conflict zone are conflict minerals since a few sources are green which means they ve been authenticated as not having conflict involvement. Materials from these green suppliers are affixed with a traceable bar code to verify their origin.) In 2012, the SEC issued a final rule in response to Dodd-Frank 1502: Public companies have to disclose whether they used conflict minerals during 2013 by May 31, 2014.

2 First Things First For most, compliance begins with a lot of investigation and paperwork. Starting from the beginning, you need to know: Are you using 3TG in products or processes? If 3TG are necessary to the functionality or production of a manufactured product, you need to conduct a country-of-origin inquiry. Investigative methods and findings need to be disclosed in an annual report and on the company s website. If the materials come from the conflict zone (or if their origin cannot be determined), the next step is a supply chain due diligence, which must be conducted thoroughly. All reports must be certified by an independent auditor (see chart 1, The road to compliance ). Right now, a company only has to disclose annually whether or not it is conflict minerals free. Companies have to figure out if they are going to become a conflict mineral free company. Chart 1: The road to compliance Step - 1 Step - 2 Step - 3 Understand Investigate Act Are conflict minerals necessary to the functionality or production of a manufactured product? Does your company contract to manufacture? Are conflict minerals necessary to the functionality or production of the contract manufactured product? If yes,go to Step 2 Conduct a country of origin inquiry to determine whether conflict minerals originated in DR Congo or adjoining countries. If conflict minerals did not originate from DR Congo or adjoining countries, or originate from Green mines, organizations must disclose findings and methods for investigation in annual report, on a new Form SD. If conflict minerals did originated from DR Congo or adjoining countries or is unable to determine if minerals are conflict free, go to Step 3. Conduct supply chain due diligence Create and post on its Web site a Report, includes: Description of due diligence performed Description of the products manufactured and facilities where conflict minerals used Certified independent private sector audit report Obtain an independent private sector audit (part of due diligence) Furnish report as exhibit to annual report on Form 10-K Disclose auditor s conclusion in annual report The Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1502, adds a burden on organizations that has to repeated year in, year out. The organizational burden comes in different forms. There is an increase manual processes, more paper work, supply chain due diligence and audit costs. Going beyond the Dodd-Frank act, High Tech organizations must answer and solve for new situations. Savvy customers are buying products that are conflict minerals free. The political landscape is constantly threatening the sourcing of materials needed to manufacture products. Companies need to go beyond compliance with Dodd-Frank. Companies need to optimize for a conflict mineral free supply chain. 2 Beyond for High Tech Companies

3 Beyond Compliance for High Tech Companies: Driving Optimized Conflict Minerals Free Supply Chain The High Tech manufacturing challenges are known and set. Is your organization going to remain myopic, sitting on the sidelines or proactively eliminate risk and optimize your supply chains to realize benefits and create a competitive advantage? Chart 2: High Tech Manufacturing Challenges High Tech Manufacturing Challenges Tantalum Global Adaptively (Design anywhere, build anywhere, deliver anywhere- any product) Growing Complexity & Rising Customer Expectations Tangsten Tin Conflict Minerals Free Supply Chain Transformation Agenda Increased Streatch Global Visibility & MFG SC Velocity Growing Importance of Sustainability Gold Rising Volatility Accelerating Cost / Price Uncertainty Free Supply Chain Transformation Achievement of conflict minerals free supply chain optimization for the High Tech industry is available today through an interwoven transformation framework. We re not only talking about a organization s reputation, but the implications that an optimized conflict mineral free supply chain has on both the top-line in the form of margin perseveration and innovation leadership retention and bottom-line in the form of operational risk cost avoidance, enhanced operational efficiencies, reduction in operational execution costs and enhanced sustainability. The Interwoven Conflict Mineral Free Supply Chain Transformation Framework fosters alignment and optimization across multiple parts of the enterprise. Beyond for High Tech Companies 3

4 Chart 3: Supply Chain Transformation Framework Strategy Global Strategy Establishes clearly defined CM Free SC strategy across the enterprise Facilities utilizing key SC performance attributes to establish competitive separation Goals & objectives are defined for strategic metrics to measure to desired performance Ensures executive priorities and imperatives are aligned across the enterprise Operating Model Global Operating Model Dedicates where and how the critical work gets done across the enterprise Links strategy, detailed organization and operational execution design Delivers goals for partners, customers, products, and channels Enablers Policies Global Common Operational Enablers & Governing Policies Accelerates time-to-value and ensures a standardized and stable solution Core operational enablers following pre-configured solution blueprint in Pega Overarching policies which set & govern functional execution Process Data Tech Global Process, Data & Technology Model Free Supply Chain Reference model ensures synchronized and orchestrated solution design principles, elements and leading practices Supported by design standards across the enterprise to support the global common template and operating model Governance Pega 7 Optimizing Performance: Conflict minerals free supply chain optimization can be realized through Capegmini s supply chain performance attributes and operational enablers to ensure rapid realization of benefits and a competitive separation. Design for Free Manufacturability: Establishing the design for Conflict Mineral free manufacturability enables conflict minerals free design workflow and approvals. It would also support design control and archiving and establish engineering design bill of materials (dbom) in the solution the structure of all parts, sub-assembly s, and components that define the product. It would also house those designs and dboms which are on the companies Conflict Minerals watch-list and migrating to conflict free status. Free Supply Base Optimization: Supply Base Optimization enabled capability to determine the optimal number and mix of certified conflict minerals free suppliers that eliminate risk, reduce complexity, minimize total cost, and ensures superior and sustainable performance. This is a continuous process supported by performance framework, model and metrics with a focus on continuous improvement. 4 Beyond for High Tech Companies

5 Chart 4: Optimizing Performance Flexibility Chain ability to respond to market and supply charges (volume, data, mix, behaviours, etc.) Supply Chain Costs Efficiency in managing the costs associated with operating the chain Predictability Degree to which a correct prediction or forecast of a system s state can be made either qualitatively or quantitatively Conflict Minerals Supply Chain Performance Attributes Fast Response Agility to serve customers (product development manufacturing responsiveness, and delivery leadtime) Reliability Delivering the correct product, to the right place, at the correct time, with the quality agreed with the customer, and with the correct documentation. (Perfect Fulfillment) Return on Assets Effectiveness in managing Assests (equipment and inventory) working capital Design For Free Manufacturability Factory Floor Free Manufacturing Operations Free Supply Base Optimization Free Integrated Inbound Materials Management Factory Floor Free Manufacturing Operations: Enables a certified conflict minerals free manufacturing operations environment ensuring: Designing CM free products that can be easily produced on existing equipment Purchasing CM free machine/equipment Purchasing CM free replacement parts Implement CM free preventative maintenance framework, operating model and plan that spans life of machine/equipment Free Integrated Inbound Materials Management: Integrated Inbound Materials Management for manufacturing provides a seamless and interlinked conflict minerals free procurement supplier logistics product flow capability. It eliminates the risks associated with traditional standalone procurement, supplier logistics, and product flow. It also enhances sustainability and maximizes end-to-end visibility and event monitoring to drive cost effectiveness and superior execution efficiency. Getting Started: There is a need by High Tech organizations to have a conflict minerals supply chain risk assessment conducted. Identifying the points of conflict as well as the operational and financial implications. Of course, gaining visibility into the procurement of materials, production lifecycles, and supply chains across a broad portfolio of components and materials is a burdensome challenge, to say the least. But once visibility is established, why not use Beyond for High Tech Companies 5

6 it to see opportunities for making positive and sustainable changes in your operations and global supply chain? In the long run, compliance with the requirements for conflict minerals disclosure could become a source of strategic innovation and an impetus to finding better, more globally responsible ways of working. When it comes to producing an auditable trail of activity surrounding the conflict minerals investigation and attestation, a software-enabled case management tool is the best option for most companies. Some of the avenues to understanding a material s origins and the company s subsequent obligations will be particularly ad hoc. Capgemini has built and deployed a Application enabled by Pegasystems Pega7 to address the Frank Wall Street Reform and Consumer Protection Act, Section Companies have an option of deploying a SaaS or on premise version of Capgemini s Application. With a dynamic case management platform that is integrated, investigators can track what they find, and then automate disclosure. Chart 5 illustrates how Capgemini s Application easily facilitates and automates the requirement. Chart 5: Compliance done right with Pegasystems Pega7 Material Case Origin Discovery Material Case Due Diligence Automated Filing Process Generate and Distribute Disclosures Case Workers Other Relevant System Purchasing Supply Chain Production Life Cycle Using a dynamic case management platform will allow organizations to go beyond conflict minerals compliance. Capgemini s Application solves the compliance component and at the same time is a solid platform to go beyond compliance working with your existing applications and investments. Capgemini s Application delivers conflict materials compliance, but the Pegasystems platform can do more much, much more. It allows you to go beyond compliance and gain a competitive advantage! 6 Beyond for High Tech Companies

7 What is Pega7? Pega7 is an example of a platform with capabilities for Integrated Dynamic Case Management. Pega7 is a platform for systems of differentiation and innovation. As such, it sits above Supply Chain Management, Product Lifecycle, and Vendor systems (the systems of record) and above any custom, function-specific and industry-specific applications (systems of differentiation). What are pace-layered applications? Gartner defines applications based on two factors: 1) degree of commoditization of their functionality and 2) frequency/rate with which they need to change. (Bill Swanton, Use a Pace-Layered Application Strategy to Clean up ERP during Upgrades and Consolidation, 8 February 2012). The three pace layers are: Systems of record Established packaged applications or legacy homegrown systems that support core transaction processing and manage the organization s critical master data. The rate of change is low, because the processes are well established and common to most organizations, and often are subject to regulatory requirements. Systems of differentiation Applications that enable unique company processes or industry-specific capabilities. They have a medium life cycle (one to three years), but need to be reconfigured frequently to accommodate changing business practices or customer requirements. Systems of innovation New applications that are built on an ad hoc basis to address new business requirements or opportunities. These are typically short life cycle projects (zero to 12 months) using departmental or outside resources and consumer-grade technologies. Beyond for High Tech Companies 7

8 Let s talk about conflict minerals compliance and a whole lot more. Greg Price Intelligent Business Process Management Leader Capgemini Greg.Price@capgemini.com About Capgemini With almost 140,000 people in over 40 countries, Capgemini is one of the world s foremost providers of consulting, technology and outsourcing services. The Group reported 2013 global revenues of EUR 10.1 billion (more than $13 billion USD). Together with its clients, Capgemini creates and delivers business and technology solutions that fit their needs and drive the results they want. A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative Business Experience, and draws on Rightshore, its worldwide delivery model. Learn more about us at The information contained in this document is proprietary Capgemini. All rights reserved. Rightshore is a trademark belonging to Capgemini. 11_04_2014