Kinaxis Customer Leverages RapidResponse for RoHS Compliance Activities, Minimizing Costs and Maximizing Execution Success

The European Union (EU) RoHS Directive facilitated the restriction of the use of certain hazardous substances in the manufacture of electrical and electronic equipment. Adopted by the EU in February 2003 and having taken effect July 1, 2006, new electrical and electronic products can no longer be sold in the EU if they contain any of the six banned substances—Lead and Mercury among the list—above specified concentrations.

It is now clear that meeting the EU RoHS compliance deadline was the start, not the end, of the compliance process for global organizations. There are a number of additional regulations that have recently or will recently come into effect, such as: China RoHS, EU's EuP and REACH. Upcoming directives make it evident that managing compliance activities should be viewed as an ongoing concern.

The RoHS Supply Chain Challenge

As one can easily imagine, EU RoHS brought about a number of unique supply chain challenges. As organizations struggled to understand the requirements and implications they sought to make the transition seamless to the customer, while minimizing the costs and operational headaches to themselves.

Much of the challenge associated with EU RoHS centered on inventory management. Organizations required in-depth visibility (perhaps a level of visibility never achieved before) into their inventory status in order to be able to identify and segregate non-compliant parts. Maximizing inventory visibility helped minimize both shortages and excess and obsolescence (E&O) and highlighted priorities for component re-engineering. It was absolutely critical to know the compliance status of supply in order for the company's MRP to act correctly.

From a demand perspective, companies also needed full visibility into purchase and production orders to understand the compliance implications, answering key questions such as: Of the current demand what is isolated and what might be shared among compliant and non-compliant product families? What products/parts are destined for where, therefore what needs to be compliant and by when?

Implementation of EU RoHS relied heavily on a company's information systems. One Kinaxis™ customer in particular—a large communications equipment provider—saw an opportunity to leverage their RapidResponse™ software to help manage the RoHS implementation given its proven advantages in enabling multi-tier visibility, easy collaboration and real-time "what-if" simulation. They recognized RapidResponse could provide them with the information resources and supporting analysis tools required to respond effectively and efficiently to changing circumstances as a result of EU RoHS. Moreover, the need to continuously align supply with demand, in the midst of the EU RoHS transition created a significant Response Management challenge, whereby they knew RapidResponse could help ensure continued customer satisfaction and operational performance.

The Kinaxis RapidResponse Advantage

Integrated with the company's ERP system, RapidResponse extracts data via automatic feeds and allows the company to instantly gather, analyze and share data in a variety of ways on an as-needed basis, averting a tremendous amount of time-consuming manual work using countless spreadsheets and other ad hoc measures. EU RoHS standards required specific information about status, compliancy date and segregation. RapidResponse's configurable data model allowed this information to be easily captured and maintained.

With comprehensive information readily on hand, a broad base of users were able to conduct scenario simulations to understand and anticipate the impact of a RoHS adjustment and do rapid course corrections as required. For example:

• Using a modified RapidResponse bill-of-material (BOM) analysis workbook with EU RoHS parameters included, BOMs were compared against top level demand to quickly assess gating (non-compliant) parts that needed to be resolved by engineering. With EU RoHS, one non-compliant component in a top-level assembly can make the whole assembly non-compliant. RapidResponse allowed analysis of deep BOMs across multiple sites and let users identify all assemblies that would be impacted. Once non-compliant components were identified, it was very simple to create a filter and identify all top-level assemblies that these components go into.
• From there, the company analyzed potential inventory shortages by modeling its ERP information (making a copy of its ERP plan within RapidResponse) and subtracting all non-compliant inventory and all demand apart from EU demand. By netting out compliant-required demand against compliant-required supply, the shortages were identified, from which the company could decide on the actions it needed to take.
• A similar scenario could be instantly executed for analyzing potential E&O which allowed Finance to set adequate reserves or proactively identify PO's the company could cancel.

This type of analysis could be performed in minutes within RapidResponse and shared with multiple parties throughout the organization comparing and collaborating on scenarios to ensure a mutual understanding and commitment among engineering, supply chain and operation execution groups.

The Results Speak for Themselves

RapidResponse enabled valuable visibility and analysis capabilities, which in turn led to superior response and execution. Beyond having successfully met required RoHS deadlines, the company managed its operations costs and performance while doing so. The benefits of leveraging RapidResponse for EU RoHS purposes included:

• Reduced E&O
• Reduced expediting costs
• Reduced direct and indirect labor costs
• Consistent and documented processes (for data collection, management, traceability etc.)
• Collaborative analysis aligned with corporate objectives
• Maintained customer service and satisfaction levels

The company developed a core competency around developing the most effective and profitable path to compliance. The company approached EU RoHS as a corporate wide strategy not simply as an isolated compliance project. With RapidResponse it has the process and tools in place to maintain ongoing EU RoHS compliance and proactively go after upcoming directives—turning its compliance activities into a competitive advantage.

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