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AberdeenGroup research shows that electronics companies are achieving double-digit revenue growth and enhanced profit margins by improving product innovation, product development, and engineering processes and leveraging PLM technology. Lack of a sustainable environmental regulatory compliance strategy, however, can place these gains at risk. Recent interviews by AberdeenGroup indicate companies have made inconsistent, and frequently inadequate, preparation for upcoming RoHS deadlines.
Over the past several years, manufacturers have faced an increasing array of new environmental mandates from jurisdictions such as the EU, China, Japan, and some U.S. states. And the trend will continue. Consequently, companies that can readily adapt to compliance changes will be able to easily compete in more markets, avoid noncompliance costs, and experience profitable growth. Major product recalls and noncompliance issues can tarnish brands, cause companies to miss revenue targets, and impact corporate value. Less dramatic noncompliance - such as the inability to readily prove compliance in a new geography - can hamper time to market, product revenue, and product cost. This report is designed to help companies implement a successful, long-term environmental compliance strategy. AberdeenGroup's Design for Compliance Benchmark identifies current approaches to complying with regulatory requirements and the shortcomings common to many companies, as well as the issues companies need to address to create a long-term foundation for meeting ever-changing compliance targets. These issues include visibility, design for compliance, design for recycling, documenting compliance, enlisting supplier support, and (if not complying) proving due diligence.
In fact, leading companies are designing products for compliance today - and achieving tangible benefits such as 15% reduction in design failure rates and 31% improvement in the number of products that are in compliance. The keys are adopting organizational approaches that encourage compliance, measuring compliance performance more frequently, and using appropriate enabling technologies to support engineers in making the right compliance choices at the point of design.
Other companies can achieve these gains as well. AberdeenGroup recommends a number of steps for implementing a strategy for compliance. These include: - Incorporating regulatory requirements early in the product design process - Making efficient end-of-life recovery and recycling a design requirement; proactively monitoring ongoing regulatory changes for existing product - Managing compliance for multiple jurisdictions, customers, and languages - Considering compliance documentation a key requirement - Selecting the appropriate level of due diligence for your company - Establishing metrics to measure and promote compliance - Taking a platform approach to meet varied compliance needs using common approaches to data, process, and document management
Chapter One: Issue at Hand
Over the past several years, manufacturers have faced an increasing array of new environmental mandates from jurisdictions such as the European Union, China, Japan, and some U.S. states including California and Connecticut. Yet companies are not giving due attention to compliance at the corporate strategy level even though this increased scrutiny puts revenue and margin growth at risk, Noncompliance may result in negative publicity or costly legal actions. More frequently, noncompliance hits companies as a series of small, less noticeable events throughout the product lifecycle that cause delays, add extra costs, and detract from product quality, adding up to a big impact, for example: - Products can't be sold in target geographic locations. - Late redesign for compliance impacts product performance. - Late product changes to comply with requirements increase product cost. - Product launches are delayed to meet unforeseen regulatory requirements. - High recycling costs and low recovery rates must be held as a corporate liability. - The product requires special labeling for certain different markets. - Inventory write-offs are required due to non-compliance
Another factor driving companies to focus on compliance is the increasingly complex and changing compliance landscape. According to Aberdeen's Design for Compliance Benchmark, more than 70% of companies cite new environmental, industry, and regulatory mandates as chief drivers for their increased emphasis on product compliance. Over the past several years, manufacturers have faced an increasing array of new environmental mandates worldwide.
Regardless of the type or source of the compliance requirement, to sustain innovation value and growth, companies must reduce the risk before major, and potentially public, problems occur or, just as important, must prevent the small noncompliance events that build up over time to the detriment of profitability and growth.
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