Supply Chain Best Practices: Material Disclosure

Material Disclosure - should manufacturers share their secret ingredients?  Product stewardship depends on material disclosure, but can it really work?

The general population wants to know:  Are there toxic chemicals like lead in the paint I just bought?  Is there cadmium in the electronic device I got for Christmas? Are there environmentally hazardous substances in the emissions from the local factory? 

How are companies tracking this?  How are they managing the information?  Is it possible for manufacturers to tell everything without, well, telling everything...?  How does Product Stewardship manage the data versus the regulations?

Whether driven by regulatory authorities, corporate sustainability directives, or consumers, manufacturers today must collect and provide substance-level product material disclosure information.  

Material Disclosure is simply the act of revealing information on what substances go into and come out of a product, a manufacturing process, and the raw materials in a supply chain.

In order to accurately provide this information, manufacturers must obtain the same detailed information from their suppliers about their products. Real-time supplier data must be broken down to the substance level, converted to a standardized measurements, then cataloged relative to all current materials, then substance volume tracking must be monitored against threshold amounts, and kept balanced against up-to-date environmental regulatory data.

Actio Corporation is a green-thinking NH-based company that has been making software to manage parts, component, chemical and substance information since 1999.  

The experts at Actio recently analyzed a range of case studies on this topic from top global companies, including a packaging giant, an electronics manufacturer, a cleaning products company, an aerospace company, and a multi-billion dollar automotive supply enterprise.  All of these companies set out to make greener products from a greener supply chain.

Here's what Actio found to be the challenges, the fixes, and the overall lessons learned:

1. Getting ingredient lists from suppliers remains a challenge

2. Interfacing with ERP (SAP, etc) system, also PLM, and Procurement software is critical

3. Clear and constant communication with suppliers on desired green material attributes yields results

4. Working in partnership with suppliers helps to accelerate the development of greener materials

5. Product greening more likely to happen if it's a core product design objective and easily gauged by product developers

"If you can automate the exchange of substance information through the global supply chain – as manufacturers must now do – you must first automate that data flow within an enterprise," said Russell McCann, Actio’s President and CEO, speaking from Actio Headquarters north of Boston.  

"Linking Material Disclosure with SAP, Oracle, and the Microsoft ERP provides raw material feeds that can be analyzed in real time to determine whether substituting one material for another produces a more compliant finished good," He said. "Material Disclosure is the Chief of Supply Chain, COO, and Product Stewardship's dream."

"Global environmental regulatory compliance – including REACH, RoHS, WEEE and many other directives – remains a challenge for manufacturing companies," said  McCann. "Actio created the Material Disclosure module to automate and centralize substance information exchange between manufacturers and their supply chain."

For this article, Actio shared further lessons learned along the way to material disclosure:

1. Visibility is essential for measuring and communicating corporate-wide progress toward greening of products

2. mployee goals help create internal commitment to product greening

3. Benefits found in pursuing and supporting government green & safety efforts

4. Obtaining chemical information from suppliers remains a challenge

5. Providing easy-to-use web-based portal for chemical data entry has facilitated data collection

6. Training suppliers helps clarify requirements for data collection

7. Collect data on chemicals-of-emerging-concern (not just the obvious ones)

8. Product Development suffers from a patchwork of global chemical regulatory systems

9. Finding hazard data on chemicals is challenging

10. It's not always enough to get certification of compliance from supplier, verification is critical

11. Collecting supplier data can inform future supplier and material selection, as long as that data is tracked and stored in a sensible way

12. Restricting chemicals used in manufacturing can have unintended consequences, like "pushing" the undesirable chemical deep back into the supply chain where it can be hidden from the manufacturer and pop up later in a public way with disastrous consequences

13. It is important to share best practices with peers, especially as this aspect of the industry is so new

14. Constant, updated visibility into as many details as possible is essential

15. Communicating with customers (downstream) is becoming more of an issue than originally thought

The solution to this dynamic set of challenges is, and must be, database-based software, simply because there is no other way to keep track of so much data and keep it up to date.  

Only a relational database platform with Regulatory and workflow modules can address the material disclosure challenge in the modern global supply chain.

The solution must be a robust, database-driven supply chain communication tool designed to securely collect, warehouse and distribute regulatory and compositional information about materials in manufacturing and supply chain processes.  

This secure platform must have multiple levels of access permissions and provide an audit trail and alert system of who accessed, viewed or changed what information and when.

The Material Disclosure solution must be able to gather relevant data not just directly from suppliers but also from in-house platforms and services such as a ERP system, PLM, and Procurement software (such as SAP, Oracle, Agile, Ariba, MS Dynamics).  

A secure SaaS platform can link into many disparate systems and platforms, such as the ones listed.  SaaS can be the best choice, as many manufacturers don't want to have their valuable chemical data forever tethered to an expensive ERP system with all its budget, maintenance, versioning and upgrade demands.  

While the data in an ERP or PLM system can turbo-charge a supply chain materials data management solution, most companies would prefer a standalone software that can interface with that data but not rely on it forever after.

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