More PLM Vendors Ready to Manage Compliance

By Rob Spiegel -- Electronic News, 6/8/2006

It may seem odd for a company to introduce compliance management solutions in the final weeks before the July 1 Restriction of Hazardous Substances (RoHS) cut-off date, but the deadline will come and go while OEMs and contract manufacturers are still struggling to put together their compliance data. Managing data is a natural service for PLM vendors, because their essential job is managing product data through its lifecycle, and a number of PLM companies have developed services to help companies grapple with the regulations.

It is also natural for manufacturers to turn to specialty companies to help manage their compliance. The job is daunting and it’s far from the expertise of most manufacturers. Manufacturers already know they will have to dig deep to cover compliance, and outsourcing a sticky job like data collection and management makes sense. Eric Karofsky, senior analyst at Boston-based AMR Research Inc., estimates steep costs that go along with compliance. “Dealing with RoHS will require up to 2 percent of revenue, and the investments address not only the large budget items such as product redesign and upgrading technology and processes, but also smaller concerns such as write-offs because of non-compliant inventories,” said Karofsky. Data management fits into the group of smaller concerns.

The latest PLM vendor to introduce compliance management services is UGS Corp. of Plano, Texas. In the release announcing its compliance services, the company notes that “Compliance must start in the product development stage when products are being selected that are known to be compliant.” The release went on to note that PLM software can be utilized to ensure compliance from product inception through its end-of-life.

One of the compliance areas that has been most difficult for UGS clients is compiling the due diligence data that OEMs will need to prove they took all reasonable measures to ensure their products are compliant. “You have to show due diligence, so OEMs are asking detailed compliance information from their suppliers,” said Kevin Faulds, Teamcenter product manager at UGS. Teamcenter is the product UGS uses to manage compliance data.

40% of Certificates of Compliance are Inaccurate

At an early point in the move to RoHS compliance, many suppliers offered certificates of compliance instead of a full materials declaration of the chemical makeup of the component. Faulds notes that certificates of compliance became a problem because of their widespread inaccuracies. “An audit of certificates of compliance by one OEM found that 40 percent of the certificates were not right,” said Faulds. “Those suppliers were simply not compliant.”

So, as part of its compliance services, UGS maintains full materials declarations for each supplier that its OEM client uses. Faulds notes that gathering and maintaining materials data can be daunting. “This is a difficult area,” noted Faulds. “You can go to a parts supplier and look for the compliance information associated with a part, but sometimes you’ll find the supplier hasn’t updated its compliance data.”

Part Numbering Continues to Be a Mess

Another area of difficulty in maintaining compliance information is the part numbering problem. Roughly 30 percent of component suppliers chose not to issue new part numbers as they switched to compliant, lead-free parts. Instead, many issued a date after which the part would be compliant. Other supplier simply assigned a new lot code indicating compliance.

Because the part numbers have not changed, OEMs must keep track of the date or lot code for each individual part in order to know whether their version of the part is compliant or not. “Part numbering is a huge problem,” said Faulds. “We track the date of the change for each part that doesn’t come with a new part number. That way we can track whether the OEM’s bill of materials is compliant even if the part numbers didn’t change.”

Faulds added that the biggest overall problem OEMs are facing in their compliance activities is the lack of processes to manage compliance data. “They’re collecting materials declarations, but they don’t have a process around managing it,” he said. “That’s the biggest issue. They have a legacy database with the data, but they can’t sort it out.”