Implementing a RoHS Compliance Assurance System (CAS) Utilizing IPC 1752 Jim Dills The GoodBye Chain Group June 2006
Restrictions on the Use of Hazardous Substances (RoHS) Highly complex Aggressive deadlines: EU: July 1, 2006 China: Expected March 1, 2007 CA: January 1, 2007 Requirement: products do not exceed Maximum Concentration Values for six substances: 100 ppm for cadmium 1000 ppm for lead, mercury, hexavalent chromium, PBBs and PBDEs Extremely risky for Electronics Manufacturing companies Why?
Unprecedented Requirements that Make it Easier than Ever to Be Non-Compliant Compliance is based on substance as a percentage of homogenous material not component Example of Homogenous Materials: Surface-mount IC chip structure Silicon chip Bond wire (Au) Lead-frame (Cu) Lead-frame plating (Cr) Solder bump (Sn-Pb) Die attach adhesive (silver epoxy or high lead solder) Plastic encapsulation Adapted from Paul Goodman, ERA
As A Result: Brand-Owners Face Tremendous Legal and Financial Risk One non-compliant homogenous material in a single part from a single supplier could result in: Multi-million dollar revenue losses Loss of customers, revenue and market share As a result: OEMs relentlessly driving RoHS-compliance down the entire supply chain CMs and suppliers face substantial business risk Out-of-compliance could mean out-of-business Many, many problems for the Electronics Manufacturing companies
Brand-Owning Companies Have Legal Liability and Risk Unprecedented Financial Loss Landmark event: October, 2001: Sony shipment of 1.3M units halted by Netherlands because of excess cadmium Sony Corporation estimates an impact on sales of approximately EUR 110 million and on operating profit of approximately EUR 52 million, including costs of rework (Press release, 2.18.02)
Legal risks - Potential lawsuits from outside parties Greenpeace has rated major electronics producers for RoHS performance, and is rumored to be contemplating lawsuits against the lower ranked companies
RoHS Compliance: OEM/Supplier Risks & Responsibilities RoHS Audit OEM: Legal/Financial Risk Brand Holder RoHS accountability Supplier: Financial Risk Responsibility: flows from OEM to supplier and to individuals responsible for data Supplier Supplier Data: flows from suppliers to OEM/brand holder Supplier
Compliance Assurance System - (CAS) Gain assurance from suppliers In format that can be audited by authorities Use standard formats when available Obtain legal certification of conformance Maintain technical compliance files for 4 years Make them easy to access for reporting Carry out selected analysis In God we trust. All others bring data. Amory Lovins
Components of a RoHS Compliance Assurance System Suppliers BoM s, vendor data, part data requests Data Management ERP / MRP / PLM substance declarations RoHS Compliance Assurance System part status requests Due Diligence Verification & Testing substance declarations, reports Customers, Regulators Data Collection Audit Trail
Compliance Assurance Systems: Demonstrating Reasonable Steps Data Collection Data Management CAS Audit Trail Verification & Testing 1752 Request/Reply Declaration Class Supplier Readiness Customer Demands Data Cleansing Homogeneous Material Analytics RoHS/JIG Business Rules 1752 Certificates Full Disclosure Certification of Compliance Material Declaration Forms Legally binding declarations Technical Documentation File System Supplier Process Audits XRF In House Test Labs 3 rd Party Test Labs
One of Biggest RoHS Obstacles: Material Declaration Management Is Y/N enough? Tier 1 Supplier OEM Do we collect at ppm level? On how many substances? Tier 2 Supplier Tier 3 Supplier Contract Manufacturer Distributor Using what format? Aggregating into what database? Tier 4 Supplier
Until Recently: A Customized Nightmare ( 100 Customers/100 Forms ) Virtually no two companies with same # of substances Every form has a different format Suppliers spending up to 40 hours to fill out one large-customer form Management via folders containing hundreds of Excel sheets/many of them with inaccurate data
What s s Needed? Material Declaration Standards Speed up compliance Cut costs Reduce supply chain stress Would ease supply chain burden tremendously, as before eco PDX RosettaNet
Streams converging Supply Chain Management CommerceNet eco RosettaNet PDX IPC 1751 / 1752 Materials Declaration Management Joint Industry Guide
IPC 1752 Material Declaration Management Standard IPC 1751 Generic Declaration Standard IPC 1752 Material Declaration Management Standard IPC 1752-1 1 Material Declaration Form IPC 1752-2 2 Material Declaration Form
IPC 1752 Levels of Declaration Class 1 Declaration: RoHS reporting at a homogeneous level in yes/no format Class 2 Declaration: RoHS reporting at a homogeneous level in yes/no format plus manufacturing information Class 3 Declaration: RoHS reporting at a homogeneous level in yes/no format, JIG level A & B at the part level and other customer-specific specific substances at the part level Class 4 Declaration: Same as Class 3 with the addition of manufacturing information Class 5 Declaration: RoHS reporting at a homogeneous level in yes/no format and JIG level A & B at the homogeneous material level and other customer-specific specific substances at the homogeneous level Class 6 Declaration: Same as Class 5 with the addition of manufacturing information
1752 Standard is at the Heart of a RoHS Compliance Assurance System Determining declaration strategy and data collection requirements Assigning roles and responsibilities Developing a project plan Building a Supplier Communications Package Conducting a pilot program Going Live with data collection Strategically using 3 rd -party testing Low cost, easy to use data management tools
IPC 1752 Material Declaration Management Standard: Data collection E-form
MDM Solution CAS Process Steps IPC 1752 Solution Internal System ERP / PLM System 1 6 Parts BOMs AVL 2 MDW Data File Export 1752 XML File MDW CAS Tool E-Mail 3 CAS Audit Trail Import 5 Internet Supplier/Manufacturer 4 E-Mail 1752 Form/ MDW Will CAS implementation provide competitive advantage?
1. Import BOM/ITEM Master files
2. Generate 1752 Class 1-61 Material Declaration Requests
3. Receive Data; Perform Data Cleansing and PPM Analytics
4. Create a CAS Audit Trail Distribute 1752 Declarations & Certificates
5. Create a CAS Audit Trail Attach Lab Test Certificates
Case Study #1: RoHS Project with Motion Control Product Company $15M revenue Need: Provide Yes/No declarations to customer Implement RoHS compliance process 1752-1 1 declarations for 90 products Assistance provided: Executive/managerial training Assessment and roadmap 1752-1 1 solution : software and project plan Results: Class 3 Y/N customer declarations: RoHS Compliance Assurance System in place Retention of customer contracts Program start: October 2005 Y/N declarations provided to customers in April 2006
Case Study #2: RoHS Project with IC Network Products Company $111M revenue Need: Provide full disclosure compliance data to customer Implement RoHS compliance process 1752-2 2 declarations for 200 products Assistance provided: Executive/managerial training Gap analysis 1752-2 2 solution: software and project plan Results: Class 6 full disclosure customer declarations: RoHS Compliance Assurance System in place Retention of customer contracts Program start: January 2006 Full disclosure declarations provided in June 2006
Case Study #3: RoHS Project with Contract Manufacturer $260M revenue Need: Provide full disclosure compliance data to large customer Implement RoHS compliance process 1752-2 2 declarations for 7 products Assistance provided: Acquired full disclosure parts information from 3 rd party data provider 1752-2 2 solution: software and parts info integration Material, substance and exemption analysis Results: Class 6 full disclosure customer declarations: RoHS Compliance Assurance System in place Retention of customer contracts Program start: March 2006 Full Disclosure declarations delivery in July 2006
Summary Companies of all sizes are at great risk Companies of all sizes do not understand due diligence requirements Of all their challenges, data management is one of the greatest Compliance software tools offer capabilities to manage data, enforce processes and establish a reliable Compliance Assurance System The IPC 1752 Material Declaration Management standard is critically important
Contact Information Jim Dills jdills@goodbyechain.com 719 488 0500