When Agilent Technologies (USA) learned that it needed to remove lead solder from its electronic test products to meet new European Union (EU) environmental regulations, it took more than five years to comply. Redesigning 2,100 products took 24 months; testing the new designs for performance and durability took another 18 months.
“If we hadn’t gotten out in front of the issue very early, the European market could have banned our products,” said Frank Elsesser, Agilent’s director of Environmental Compliance, Product Regulations and Safety. “We had a third of our annual revenues on the line, about a billion US dollars. And the regulations are expanding.”
Virtually every manufacturer on the globe faces Elsesser’s challenge, but few are as aggressive as Agilent in meeting it. “Our products last for decades, so we realized that meeting the regulations early could give us a strong competitive advantage,” Elsesser said. “And it has.”
A COMPLEX MAZE
Following the EU’s lead, regulations that limit the presence of hazardous materials in products and manufacturing processes are being adopted by government after government, affecting almost every industry. While most manufacturers respect the legislation’s intent, they face a complex maze of evolving and sometimes contradictory regulations that affect the production, distribution, use and disposal of their products.
Given the complexity, environmental compliance cannot be a one-time project, said Meglena Mihova, partner at the European public affairs consultancy EPPA (formerly known as European Public Policy Advisers). With the increasing barrage of regulations, most notably the Restriction of Hazardous Substances (RoHS), the Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH) and the Waste Electrical and Electronic Equipment (WEEE) directives issued by the EU, Mihova urges manufacturers to be proactive.
GETTING AHEAD OF THE CURVE
Companies shouldn’t sit back and wait for the next regulation, Mihova said, but should get involved as directives are written and expanded. “The politicians involved in creating environmental regulations like RoHS and REACH often fail to understand the complexity of the supply chain,” Mihova said.
“For companies to be compliant, they have to reach out to different continents and, in many cases, completely redesign a very complex product. Sometimes it takes years to find suitable substitutes and retest for the required quality and reliability of a product that may be in use for 20 or 30 years.” Mihova points to US-based Agilent as a strong example of proactive action.
Although the monitoring-and-control- equipment giant was not in the immediate scope of RoHS when the regulations were first enacted, Agilent immediately examined its supply chain and began to redesign its products with compliance in mind. Its manufacturing experts also became active participants in the legislative process.
Meeting RoHS regulations took Agilent 60 months, including 24 months to redesign 2,100 products and 18 months to test the new designs.
“Agilent got involved in consultations, helped explain the challenges for the sector and why they needed more time to comply,” Mihova said. “They even worked for revisions in the directive. This honest and proactive approach was very positive.”
AT RISK: $1 BILLION
To comply with the RoHS directive, Agilent needed to find a substitute for the lead solder it uses in circuit boards and work with its suppliers to ensure that they, too, made the change. “Taking the lead out of solder is a fundamental shift in technology,” Elsesser said. “It’s very important to our customers that it’s done in a well-tested and methodical way. We wanted to get a jump on it well before we faced the regulatory deadlines.”
Lead, a heavy metal, was just one of many regulated substances Agilent needed to track. For each substance, Agilent’s designers and engineers needed to determine which supplier components to include in their designs and whether the sum of those choices would meet the regulatory limits in any given country. Agilent also needed to manage its shipments to ensure that only compliant products were sent to regulated countries.
“We knew if we didn’t produce RoHS-compliant products in a certain number of years we might lose market access, which is a significant amount of revenue for our company,” Elsesser said. “The EU represents probably 30% of our revenue right now, but as environmental regulations become stricter around the globe, I can see that growing to 90% or even 100%.”
The challenges are daunting, but Agilent is turning them into opportunities. “We wanted to be at the forefront of developing products that were and are sustainable,” Elsesser said. “In some cases we’re seeing new contracts based on our ability to demonstrate whether our products meet certain environmental regulations around the globe. Our customers are not only requesting information about RoHS compliance; in some cases they’re demanding it, because our products are integrated into their solutions.”
With little to no regulatory consistency from country to country and new regulations emerging almost daily, manual tracking methods carried too much risk. Therefore, Agilent implemented a sophisticated materials compliance application to track emerging regulations and re-calculate the total volume of each hazardous substance in each product as components change. By designing its products to the highest standard from each regulation, Agilent ensures that every product it manufactures meets or exceeds all standards worldwide.
“SOMETIMES IT TAKES YEARS TO FIND SUITABLE SUBSTITUTES AND RETEST FOR THE REQUIRED QUALITY AND RELIABILITY OF A PRODUCT.”MEGLENA MIHOVA
“One of the things we found early on was that building a foundation on a solid environmental data management system would get us there and help us evolve with the rapidly changing regulations over time.”
Elsesser advises other companies not to underestimate the strategic value of a solid environmental data management system for materials compliance. “This isn’t a typical IT application; it helps you understand the value of your investments in environmental compliance. You can use this as a strategic advantage.”
FINDING OPPORTUNITY IN THE CHALLENGE
AB Sciex, a US-based maker of mass spectrometers and other scientific equipment, is another company transforming materials compliance from a regulatory chore into a market opportunity.
Most of AB Sciex’s products won’t be subject to regulatory restrictions until 2016. But George Valaitis, AB Sciex’s RoHS program manager, said AB Sciex wanted to put an efficient materials compliance program in place to ensure the company’s market access worldwide.
“The major issue I see with companies that wait too long is they have to pull all the people out of research and development, or engineering, and push them into environmental compliance for six months,” Valaitis said. “During that time they’re not developing new products and the business suffers.”
The challenge is huge and growing. Although RoHS targeted just six substances, Valaitis points out that additional directives like REACH, which covers 138 substances today, are expanding at the rate of 20 to 50 substances each year.
“THE COMPLIANCE PROGRAM IMPLEMENTATION THAT WE HAVE IS PROVIDING US WITH AN OPPORTUNITY TO TIDY UP EXISTING DESIGNS, REALLY ENHANCE OUR PRODUCT DEVELOPMENT PROCESSES, AND ATTAIN ENVIRONMENTAL COMPLIANCE AT THE SAME TIME.”GEORGE VALAITIS
AB SCIEX’S ROHS PROGRAM MANAGER
“It’s a gradual, step-wise process that the EU has put into place,” Valaitis said. “We’ve gone forward with our program to really drive environmental compliance and restrict the use of those substances today in our products. Then we will be ready for when the laws do come into effect.”
By examining its own processes and developing better information exchanges with its suppliers, Valaitis believes that AB Sciex is gaining an unexpected bonus: efficiencies in its development cycle. “The compliance program implementation that we have is providing us with an opportunity to tidy up existing designs, really enhance our product development processes, and attain environmental compliance at the same time,” he said.
For example, Valaitis said that when AB Sciex redesigns its circuit boards, the company often gains a cost advantage of 10% to 20% by leveraging design enhancements and cleanups for a more robust overall design. “As the deadlines approach, there are going to be more questions about what’s in our products and what’s not, and we’ll be in a very good position to let our customers know.”
AB Sciex is achieving cost improvements as much as 20% by enhancing its designs while meeting materials compliance regulations.
PARTICIPATION CRUCIAL TO SUCCESS
The key to successfully navigating the complex sea of legislation is to get involved in its creation early and often, Mihova advised. “Don’t be afraid to come to the public policy table to address restrictions on a new substance before they are put in place,” she said. “Explain where you absolutely need the substance and then team with the authorities to work out a regulatory scenario that will minimize the negative impact on your business.”
Especially for complex products, it is critical to have visibility into and control over the supply chain, she said. “You must know who is producing what and which suppliers are providing compliant components so that you can react quickly and with minimal risk in the increasingly intensive regulatory environment. You must anticipate; you must be proactive. You simply can’t be silent.”