It doesn’t have the industry buzz of the European Union’s Restriction of Hazardous Substances (RoHS) directive, but the next environmental compliance initiative to come from Europe will have as big of an impact on the electronics supply chain and the environment, if not bigger, according to many industry sources.
EuP, a framework directive on eco-design of energy-using products — which the European Commission defines as “a product that, once placed on the market and/or put into service is dependent on energy input (electricity, fossil fuels, and renewable energy sources) to work as intended, or a product for the generation, transfer, and measurement of such energy, including parts dependent on energy input and intended to be incorporated into an EuP” — was published in the Commission’s Official Journal in July 2005, came into force in August 2005, and member states have until August 11, 2007, to implement it into national law.
EuP and its eco-design requirements expects manufacturers to consider the entire lifecycle of product groups — from raw materials, acquisition, manufacturing, packaging, transport and distribution, installation and maintenance, use and end-of-life disposal — and to assess the ecological profile of the equipment by requiring manufacturers at each stage to evaluate consumption of materials and energy, emissions to air and water, pollution, expected waste and recycling/re-use.
Unlike other EU directives that focus on one phase of the production process, as REACH does with the materials stage, EuP aims to have an impact on the entire design cycle, primarily because the Commission has estimated that more than 80 percent of all product related environmental impacts are determined during the product planning phase. It has, therefore, determined that integration of environmental considerations as early as possible into the product development process is the most effective way for introducing changes and improvements to products.
In the case of EuP, manufacturers, not just producers as defined by RoHS, will be responsible for assessments; and, between testing, tracking and labeling requirements, this could add a significant amount of work for some members of the electronics supply chain. Enter product lifecycle management (PLM), the process of managing the entire lifecycle of a product from its conception, through design and manufacture, to service and end-of-life disposal.
“The [EuP] idea is to create a green supply chain for energy-using products. If your company provides information on energy and environmental compliance, you can become a more preferred supplier to the customer developing the end product,” Henry Seddon, VP, Europe, Middle East and Africa Marketing, UGS PLM Software, a division of Siemens Automation and Drives, said. “That preference rating in product lifecycle management can ensure that your product is available for use in new designs. Companies will use PLM to grade designs for risk factors. Energy consumption and proof of environmental readiness are risk factors.”
The relationship between PLM and the electronics supply chain is a mutually beneficial one. While PLM can lend a hand in better compliance design, compliance is lending a hand in increasing sales in the PLM market through risk management.
“Risk management and compliance are very, very hot in the supply chain and the electronics sector and they are driving a lot of business,” said Kevin North, president and CEO of PLM company Dyadem International, which last month released its Stature lifecycle management product aimed at both reducing time to market and the cost of poor quality.
“Let’s face it, compliance is everywhere. When you look at quality through the entire design process, you’re going to get your products to market faster. Quality can be associated with speed. You can be the hare, not the turtle,” he said.
Without doubt, the absence of PLM concepts when it comes to EuP and other compliance initiatives is costing the electronics industry money.
“For those companies producing energy-using products, [poor PLM] will be a huge risk,” Seddon said. “With the growing market pressure on green compliance, products with eco-friendly labeling will have a competitive advantage. PLM is the enterprise application set that manages requirements and the design process. Designing to eco-friendly requirements can open up new markets or prevent removal from existing markets. Ultimately, government directives and consumers making the buying decision will decide, but producers can separate themselves from their competitors with their environmental stewardship and create a competitive edge in the market.”
Dyadem’s North put a tangible figure on skimping on PLM and risk management: “The cost of poor quality can be as much as 15 [percent] to 30 percent of revenues for a global manufacturer,” he said. “In highly competitive industries and with a global supply chain, addressing quality from the design stage is imperative.”
Jeff Hojlo, an AMR Research analyst for product innovation in PLM, estimated PLM revenue will grow 9.7 percent year-over-year in 2007. He pointed to product data management as the first way PLM can help members of the electronics supply chain face EuP and other compliance initiatives.
“The second part is the design aspect of it, using CAD [computer-aided design] solutions on the front end to proactively design green products and design compliant products so you are not re-engineering things,” he said.
Hojlo see further growth opportunities for PLM and compliance: a product analytic layer. “Underneath that data layer needs to be an analytics layer to help you to search for compliant parts, report on them and let the people in your supply chain have visibility into that. That hasn’t existed at this point. That’s a great opportunity for PLM vendors. It’s really about decision support across the value chain.”
Hojlo maintained that much of 2007’s 9.7 percent expected growth will come from PLM’s “low-hanging fruit,” namely CAD, but opportunities beyond CAD for PLM and compliance are ripe for the picking.
“Sure product data management is important, but you need to make that data actionable. In regulatory compliance, that’s nowhere more important than being able to quickly search and report on what parts are compliant, to verify materials declaration sheets you get from suppliers, and then to enable people in your company and partners outside your company to view products you are designing and the compliance of them. There’s definitely a gap there that can be filled,” Hojlo concluded.