supply chains get the lead out

Consumers will soon have the comfort of knowing that the laptop they spend so many hours hunkered over each day is free of hazardous components. Ditto for cell phones, microwave ovens and copying machines.

For that they can credit the European Union, which has issued several new environmental directives. The EU's Reduction of Hazardous Substances directive (RoHS), which takes effect in the summer of 2006, limits the amount of lead, mercury, cadmium and other toxic substances electronics manufacturers can use in their products. Though an EU directive doesn't have the force of law in the United States, U.S. consumers still can expect to benefit. Large U.S.-based electronics manufacturers are expected to adopt the EU standards for all of their products, not just those intended for sale in Europe.

There's still more good news for consumers. Instead of tossing their broken or obsolete cell phones and desktop computers in the basement, they'll soon be able to recycle them for free. A second EU initiative, the Waste Electric and Electronic Equipment (WEEE) recycling directive, mandates that electronics manufacturers provide a way for consumers to return those devices free of charge. That directive, which will be implemented in phases, will be in full effect by the end of next year.

Though this is welcome news for consumers, manufacturers may not be so grateful. Both initiatives have left U.S.-based manufacturers and component suppliers scrambling to re-engineer their supply chains. Electronics manufacturers like Hewlett-Packard not only have to develop new manufacturing processes, but they also must devise ways to keep track of components and temporarily manage separate streams of compliant and non-compliant inventory. And if policing its own manufacturing operations weren't enough, HP also has the challenge of assuring compliance among its suppliers.

"We need to know that all parts are compliant, and our product data management systems have to track all the way down to the part level," says Judy Glazer, a director in HP's process development, supply chain services and product processes organization. "We depend on our suppliers to have good control processes, and we're working with them to be sure those processes are in place." Among other refinements, the company has had to make changes to its supply chain management software to handle the additional tracking requirements. Glazer expects to make further adjustments to the company's reverse logistics operations once the RoHS directive takes full effect. At that point, HP will be barred from selling refurbished units in the European Union.

Digital dinosaurs
What's prompted the environmental initiatives is the staggering increase in the amount of electronics waste being generated worldwide,much of it containing toxic substances. The EU estimates that electronics waste is growing three times faster than any other product segment. In the United States, electronics products accounted for between 2 and 5 percent of total waste in 2001, according to Chris Newman of the U.S. Environment Protection Agency. Newman adds that of the 40 million computers that became obsolete in 2001, only 10 percent were recycled.

At the heart of the problem is consumers' eagerness to upgrade their gadgets as soon as a new model hits the market. "Electronics [disposal] is becoming such a big issue because of the speed at which consumers are buying new equipment," says Eric Karofsky, a research analyst at AMR Research. "Cell phones are typically outdated in just a few months, and with the way prices are coming down, consumers are buying at unprecedented rates. While the amount of waste [represented by a used cell phone] is minimal compared to putting a CRT monitor in a landfill, it's increasingly catching up to scale."

Though Hewlett-Packard may be on the ball, Karofsky says that many companies have not started to address how they'll adapt their supply chains in order to achieve compliance with the EU directives. "I would say overall that a lot of people really need to get going on this," he says. "We're getting a lot of calls asking what we know about these directives. For those people it's almost too late."