Transcript TFI Environment - Stanford Graduate School of Business

Why Design for Environment
Makes ‘Cents’ in the
Electronics Industry
by Pamela J. Gordon, CMC
President, Technology Forecasters Inc.
April 19, 2006
A One-Slide History of TFI
Information, Insight, Interaction for Effective 2006:
Buyers’
Manufacturing Relationships
Guide
1990: 1st
Contract Mfg.
from a Global
Perspective
report
Founded
1987
1999: 1st
Quarterly
Forum
2001:
published
2001: ODM; book
added Chinabased research
2002-3:
Pricing
Model and
1995: World-Class
Outsourcing Guide;
Customer Retention Research
www.TechForecasters.com
DfE Almost Always Results in Profit
Hundreds of examples in electronics industry
and others
Reduces
Expenses
Increases
Revenue
Competitive
Edge
Reduces
Risk
Eliminating hazardous substances
X
√
√
√
Simplifying disassembly /
maximize recycling
√
√
√
√
Reducing energy consumption
√
√
√
√
Lifecycle Efficiency
√
√
√
√
Process Efficiency: in
manufacturing & other operations
√
√
√
√
Design for…
√ = Yes
/
√ = Some
/
X = No
Then, why are most
electronics companies slow
to adopt Design for
Environment?
Let’s see what recent
benchmarking studies tell us…
One Way to Make Cents:
--Benchmarking Studies

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Quickly compare own environmental strategies
and progress with those of numerous others
Assess approaches of suppliers
Elicit attitudes, needs of customers
Find best practices, identify leadership positions
Today

5 TFI benchmarking studies; 250 respondents
Primarily telephone interviews
OEMs, CMs, ODMs, component suppliers, recyclers,
design firms, governments
Funded by members of the Quarterly Forum
(of which Agile Software is a Corporate Sponsor)
OEM Plans to Design for Easier
Disassembly, Reuse, & Recycling
Will not
redesign
65%
Redesign
in-house
23%
Our CM to
redesign
8%
3rd party
redesign
Other 2%
2%
Concern About Recycling
Requirements in Other Regions*
Concern
for other
regions
59%
No
concern
for other
regions
12%
Uncertain
29%
*Regions on next slide
Non-EU Regions of Concern
Regarding Recycling Requirements
APAC
USA
Canada
Oceania
CALA
%
0
10
20
30
% of respondents (>1 response)
40
50
60
70
80
APAC = Asia Pacific
CALA = Central and Latin America
Are You Considering Remanufacturing
Some of Your Products?
--Once Used by One Customer, then Offering for
Sale to Other Customers?
Considering
re-mfg
18%
Uncertain
28%
Not
considering
re-mfg
54%
According to Component
Suppliers Interviewed
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In the lion’s share of cases, compliant components
will not be more expensive
The opposite will be true after July 1, 2006
Tie RoHS transition to cost-reduction plan
Components are being designed with reuse in mind
Components: great place to start for efficiency
 Economic gain throughout life cycle
Chemical reductions are key Smarts from Freescale: (C. Marple)
•DfE is like quality, manufacturability,
test, etc.
•Upfront design is more effective,
easier, cheaper
•“You get what you design”
According to Contract
Manufacturers* Interviewed

Better business model to shift all the way to
RoHS 6

--Rather than to RoHS 5 then having to shift again
Now starting to charge customers more for
non-RoHS compliant products
 Design for Environment (DfE) offered by
nearly all large CMs and ODMs

And by some mid-sized and smaller CMs
 Stressing cost savings

* And Original Design
Manufacturers (ODMs)
Benchmarking Study Highlights
- CMs and ODMs 
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Environmental services (Nov. 2005)*
Two-thirds simplify disassembly / maximize
recycling
One-half reduces energy consumption
Only one or two help with government interface

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Exemptions to Europe’s Restriction of Hazardous
Substances (RoHS) Directive
Registration for Europe’s Waste Electrical and
Electronic Equipment (WEEE) Directive
*Funding: TFI Quarterly Forum member
According to OEMs Interviewed
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Hundreds of cases in which design for
efficiency has reduced costs
Competitive edge: Japanese companies’
different approach
Still most don’t see need for DfE
Ways to Minimize RoHS Costs


Use contract manufacturer / original design
manufacturer way ahead of curve
When possible, convert non-compliant parts to
compliant ones
Converting

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Employ software tools for

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so long as the conversion process is
verified by third-party lab (e.g., E-Certa)
leads, with
due
diligence
Efficient tracking of compliant parts
Design-and-manufacturing changes, and
Reporting of due diligence
Use RoHS as a business opportunity to
Weed out products whose time is really up – before the
deadline, for many economic benefits
 Tighten component selection and procurement processes
 “While the patient is open…” (Dan Henes, Celestica)

Unpeeling the Onion
Degrees of approach to design for WEEE
No product redesign
Design for disassembly
Use recyclable materials
Reuse / Upgrade in next gen’s
Lease products only
No
product
Materials that “self recycle”
Minimal product
Common Misunderstanding
“WEEE is one of those regulations that
cost us more money, right?”
Other companies have used
design for reuse/recycling for
competitive advantage…
Competitive Benefits:
Cost Reductions
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Business benefits of product rationalization
Maximize profitability “Once the patient is open”
Reusing modules, for savings & customer loyalty
Smaller, lighter, faster, more reliable, etc.
Cost to manufacture, Cost to use
Customer satisfaction:

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Reliability, longevity
Easy of returning
Redesign for Reuse/Recycle and
Profit: Mechanical
Examples of Techniques
Business Advantages
Easily detachable parts
Original assembly faster,
easier, less training
Removes complexities
reduces time, cost
Simpler design
Reduce 10% screws and 5% Smaller bill of materials
parts ea. year
(BOM), shorter assembly
time
Re-designed function, using 40% cost reduction
new component: 50%
hardware reduction
Redesign for Reuse/Recycle and
Profit: Mechanical (continued)
Examples of Techniques
Business Advantages
PCBs, wires and cabling
(copper), toner cartridges,
plastic are easily separable
Detach all parts in a single
direction (e.g., all parts would
unscrew to the left)
Place battery on top of board
(not bottom)
Recover more value from
reuse, recycling
Shorter assembly time (less
time and motion included in
contract manufacturer bid)
Removed in seconds rather
than minutes to undo screws
Redesign for Reuse/Recycle and
Profit: Material
Examples of Techniques
Business Advantages
Fewer blended materials for
housing; use materials that
can be recycled as a whole
Labels of same material as
housing, eliminating label
removal (JEITA)
Free of restricted fire
retardants and other
substances that hinder
recycling
Homogenous materials can
sometimes be less expensive
Appearance sleeker, more
attractive
Meet RoHS and substance
bans by individual countries
and customers
Redesign for Reuse/Recycle and
Profit: Material (continued)
Examples of Techniques
Business Advantages
Marking materials according
to recyclables
Reduction of paints on plastic
housing; decreases
impurities to foster efficient
recycling.
Use recycled plastic
Easier to see and track
materials for recycling
Paints are expensive/toxic;
painting equipment and time
are costly; clean up and
permits required.
Can cost 50% less than
virgin materials
Less cost in manufacturing,
freight, and recycling.
Avoid waste from consummables (e.g., Fill pots of ink)
Redesign for Reuse/Recycle and
Profit: Extend Life
Examples of Techniques
Business Advantages
The parts that are least
durable are replaceable
Reduce number of moveable
parts
Competitive differentiation
owing to longer-life products
Reduces some of most
complex & expensive parts
Design remaining moveable
parts (often breakable) to be
more durable
Puts off costs for repair and
recycling
Provide upgrades in memory Smaller BOM, avoid handling
and software drivers via
& rising shipping costs,
producer’s web site
greater functionality more
easily
Upping the Competitive Ante
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Example: Acer and CSR
Accessing markets and B2B customers
Countering competitors’ failures
Keeping up with competitors’ successes
Risk avoidance (peak oil, etc.)
Customers’ selections
Competitive view of environmental leadership: Celestica
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“We want to be viewed in the industry as the green leader and
gain market share.”
“The one who does it first will get a warm reception from market
place.”
“A lot of people look at letter of law and think they can just
survive, or we can get business advantage.”
Recommendations
- Regulators 
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As with EuP* invite industry to develop & present best
practices
Harmonize requirements for recycling & other environmental
issues between regions.
Promote voluntary recycling & other environmental steps,
using Japan’s model—declare deadline beyond which
regulation will be necessary should voluntary measures not
be met.
Ensure adequate time between approval of laws & deadlines.
Have pilot producers & software companies “engineer”
compliance process, for least “red tape” & most effective
compliance by all.
*Energy-using Products
Recommendations
- Electronics Industry 
Create collectives not only for recycling products, but
also for design for disassembly, reuse, and upgrade
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Jointly fund and share methodologies
…for ease of implementation, standardization, & profitability
for all concerned
Participate with European Commission as it finalizes EuP
Directive.
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EU wants to examine best practices
Include standards for data collection and management early
Set precedent for not only future EU regulations but also
environmental & social requirements by other regions
Recommendations for OEMs
- and for CMs offering design services
Design products—from the start—according to
reuse, upgrade, & recycling “rules” provides
numerous financial & competitive benefits:

Quick, efficient, & cost-saving disassembly

Multiple reuse & upgrade of product (thus extending
revenue opportunities)

Maximum recycling value (for revenue increase)

Profitable by-product of “design for disassembly” is
quicker, more efficient, & less costly original assembly
TFI DfE Workshop,  Invest a few thousand dollars in training design
Toronto, Sept. 2005 engineers (electrical, mechanical, & system) in DfE
best practices
Recommendations for OEMs
Explore Models for Upgrade, Reuse, and Dematerialization

Managers at electronics companies with ‘throw away’ products
say, “Reuse doesn’t apply to our products.”

Multifunctional teams can sketch out ways model can be used
for competitive gain, cost savings, and enhanced customer
loyalty.
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At least one sponsoring executive
Finance / cost accounting
Marketing
Design / quality
Supply-chain / logistics
Legal / EHS
Use forward-thinking software
Recommendations
- Continue to Learn Best
Practices 
Next benchmark study: Due Diligence Strategies
for RoHS Compliance
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Compare approaches to RoHS due diligence
Adopt best practices for a sound due diligence defense
for RoHS
Invite your colleagues, customers, suppliers to the
next Design-for-Environment Workshop
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June 7, San Diego
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Highlights from guest speaker Manthos Economou of Palm,
Inc.
Then, July 13 in Boston
5 Recommendations for Meeting
Requirements Profitably
1.
Get executive sponsorship up-front: Use Lean and
Green argumens
2.
3.
4.
5.
Maximize profitability, “once the patient is open”
Take advantage of existing resources for design,
mfg., logistics, return, disassembly, etc.
Meet customers’ desires better than do
competitors
Realize this is not a single event

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Add power reduction to requirements document
Reduce overall ecological footprint of materials,
processes, products, end of life
Competitive advantage
Management Approaches to the
Market’s Environmental Requirements
Macro shifts in how
we design, make,
use, reuse, and
dispose of products
Fire Drill: Ad hoc
implementations
for compliance
Tactical
Strategic
Environmental
Compliance: Cost or
Competitive Differentiator?
Another basis for a prediction…
40 Years of Increasing Content
Scrutiny, and $ Affect on Industry
1970
‘70’s
’80’s
‘80’s-90’s
’90’s
US Industries -- EPA established
Chemical Industry -- DDT ban
Petroleum -- Gasoline
Construction, wood products
Food Industry -- “Nutrition Facts” table
Each of these industries is just as profitable now (or more so)
Extrapolate pattern of $ affect into the future…
Now…
Coming…
Perhaps…
Electrical/Electronics, RoHS
REACH, IPP, EuP
Energy / Water / Emission Monitors
With Increasing Scrutiny…

Be ahead of the curve
Without “fire-drill” pressure
 Competitive advantage

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Use robust data collection and
management
It’s not a one-time task
 A good time to tighten processes


Escalate environmental management to
senior levels: it’s a corporate strategy
Some Last Words…
“I don’t think DfE should be treated as extra or a
separate entity, but rather a part of the design
process. It’s just like quality – it’s not separate,
but more a matter of individual responsibility.”
-Michael Lavesque, ESI (Ontario, Canada, design firm)
Design for
Environment
Workshop, February
2006,
at AER Worldwide
Thank you!
Pamela Gordon
[email protected]