IHS Webcast - Green Products and Supply Chain Disruption
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    IHS Webcast - Green Products and Supply Chain Disruption IHS Webcast - Green Products and Supply Chain Disruption Presentation Transcript

    • Green Products and Supply Chain DisruptionConflict Minerals in the Supply ChainPresented by GreenBiz.com, Moderated by John Davies
    • John Davies VP, Senior Analyst, GreenBiz Group Andrew K. Reese Editor, Supply & Demand Chain Executive Scott Wilson Content Solution Strategist, IHS Rory King Director, Global Product Marketing, IHS
    • Topics We’ll Cover • U.S. Conflict Minerals Law • Original Research on Conflict Minerals • Supply Chain Sustainability – Risk and Reward • Sustainability Tools Best PracticesVisit booth #103 to speak with IHS and obtain valuable resources. 3
    • Disclaimer• The information contained in this presentation addresses complicated and fact-specific issues. In no way is any of this intended to convey legal or regulatory advice on matters discussed or implied. You should seek professional legal, regulatory or supply chain advice regarding any applicability of these matters and with respect to your companys specific circumstances. © 2010 Supply & Demand Chain Executive Copyright © 2010 IHS Inc. All Rights Reserved. 4
    • Conflict Minerals Andy Reese Editor, Supply & Demand Chain Executive magazine AREESE@SDCEXEC.COMVisit booth #103 to speak with IHS and obtain valuable resources. Copyright © 2010 IHS Inc. All Rights Reserved. 5
    • Supply & Demand Chain Executive The executive’s user manual for successful supply and demand chain transformation, providing analysis, viewpoints and case studies to steer executives and supply management professionals through the world of supply and demand chain enablement to gain competitive advantage. www.linkedin.com/in/andrewkreese twitter.com/SDCExec www.SDCExec.comVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 6
    • Green Supply Chain Awards – 2010 Winners 4flow AG D.W. Morgan Company Image Microsystems Penske Logistics ADTRAN Damco International INSIGHT, Inc. PUMA Aspen Logistics, Inc. DHL Express JDA Software Group, Inc. Ryder System, Inc. Basware DSC Logistics Kaiser Permanente Saddle Creek Corporation Black Diamond Equipment Ltd. e-LYNXX Corporation LeanLogistics SciQuest Brightpoint EcoVadis LOG-NET, Inc. Source4Style Brightstar Evergreen Line Maersk Line Spinnaker Cargill eZCom Software Inc. ModusLink Global Solutions Strive Logistics, LLC CaseStack Firefly Technology Corp. Murphy Warehouse Company SYSPRO Cass Information Systems, Inc. Geodis Wilson National Retail Systems, Inc. The Timberland Company Cathay Pacific Airways Limited Global eProcure Norfolk Southern Corporation Total Logistic Control Celestica Global4PL Supply Chain Services Novartis Animal Health Trade Wings CHEP Equipment Pooling Systems Half Price Books Novation Transplace Cisco Systems Horizon Lines, Inc. OB10 Unisource Worldwide Container and Pooling Solutions ID Label, Inc. OfficeMax Wallenius Wilhelmsen Logistics Converge IHS Inc. Omnify Software Watson Land Company YRC WorldwideVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 7
    • The Country  Democratic Republic of the Congo (DRC)  12th largest country in size  71 million people (18th largest)  GDP: $22 billionVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 8
    • The Country  Democratic Republic of the Congo (DRC)  12th largest country in size  71 million people (18th largest)  GDP: $22 billion  Rich in natural resourcesVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 9
    • The Conflict  1996-1997 - First Congo War  1998-(2003) - Second Congo War  Eight African nations  25 armed groupsVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 10
    • The Impact  5.4 million people dead  >1,000 people still dying daily  Forced labor  Child labor  Widespread sexual violenceVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 11
    • The Law – History in Brief  Bills on conflict minerals introduced in 2009  Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010  Signed into law on July 21, 2010  Section 1502: Conflict MineralsVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 12
    • The Law – Provisions in Brief  Does not ban the minerals  Imposes new reporting requirements  Annual disclosures to the SEC  Due diligence requirements  Audit / certification requirementsVisit booth #103 to speak with IHS and obtain valuable resources. © 2010 Supply & Demand Chain Executive 13
    • The Minerals Cassiterite (tin) Columbite-tantalite (coltan, tantalum) Wolframite (tungsten) Gold Or their derivatives “And other minerals ... financing conflict in the DRC.” © 2010 Supply & Demand Chain Executive 14
    • Our Research Study  Objectives:  Understand awareness of Conflict Minerals issue and Dodd-Frank legislation, and benchmark preparedness to meet law’s requirements  Assess supply chain exposure to pending legal requirements  Identify strategies for dealing with Dodd-Frank across the supply chain  Research Period:  Conducted: July – September 2010  Practitioner Peer Review and Report Preparation: October 2010  Survey Methodology:  Online surveys  Interviews and peer review  Participants:  190 Global Manufacturing & Non-Manufacturing Organizations  77% US, 23% Non-USVisit booth #103 to speak with IHS and obtain valuable resources. 15
    • Key Findings of Original Research on Conflict Minerals Scott Wilson Content Solution Strategist, IHS Inc. SCOTT.WILSON@IHS.COMVisit booth #103 to speak with IHS and obtain valuable resources. Copyright © 2010 IHS Inc. All Rights Reserved. 16
    • “Innovation, Security, & Risk” by IHS Inc, featuring Supply & Demand Chain Executive IHS – A leading information provider Founded in 1959, IHS is a leading source of • Employs 4,400 colleagues in 30 countries who information and expert analysis in pivotal areas speak 50 different languages shaping today’s global businesses • IHS customers include nearly 70% of the US Fortune1000 and 80% of the Global Fortune 500 • Public (2005), NYSE IHS • Tens of thousands of customers and hundreds • FY10 revenue: $ 1,075 million of thousands of end-users in over 100 countries Energy & Design & Defense, Risk & EHS & Country & Industry Commodities, Power Supply Chain Security Sustainability Forecasts Pricing & CostVisit booth #103 to speak with IHS and obtain valuable resources. Copyright © 2010 IHS Inc. All Rights Reserved.
    • Modest Awareness of the Bill Passing Q: Were you aware that Conflict Minerals were signed into this law? No – Not aware 45% 55% Yes – Aware Only slightly more than half of those surveyed were aware of this conflict minerals law. Copyright © 2010 IHS Inc. All Rights Reserved. 18
    • Extent of Each Mineral or Derivative Used Don’t know (11%) Moderate + Extensive Use (29%) Coltan Cassiterite (tin) Coltan Cassiterite (tin) (tantalum) (tantalum) Wolframite Gold Wolframite (tungsten) (tungsten) Gold 55% None Used (35%) Minimal Use (26%) Cassiterite (tin) Coltan Cassiterite (tin) (tantalum) Coltan (tantalum) Wolframite Gold Wolframite Gold (tungsten) (tungsten) More than one third of respondents use a significant amount of tin and gold today (42% tin and 34% gold, respectively). Copyright © 2010 IHS Inc. All Rights Reserved. 19
    • Difficulty Identifying Minerals and Source Q: Your Company will find indentifying these minerals and their origin as: Very Difficult Somewhat Difficult 42% 29% Simple to Very Simple Moderately Difficult 7% 22% 93% of respondents believe that identifying these minerals and their origins will not be easy. Copyright © 2010 IHS Inc. All Rights Reserved. 20
    • Supply Chain Impact vs. RoHS/REACH Q: Compared to RoHS/REACH, what impact will Conflict Minerals have? 21% 16% “Requirement to report annually to the SEC and to submit a due About the diligence plan (audited Compared with EU RoHS / Higher same REACH Environmental and certified by an Compliance, what Impact will independent 3rd party) Conflict Minerals have on the 30% Supply Chain? 33% will generate more high level attention compared to RoHS/REACH issues.” - Supply Chain Professional Unsure Lower Opinions are almost equally divided on how Conflict Minerals compares with the impact of RoHS/REACH on the supply chain. A combined 37% say it will have the same or higher impact, 33% say it will have less of an impact, and almost a third are unsure. Copyright © 2010 IHS Inc. All Rights Reserved. 21
    • Gap: Supply Chain Visibility and Control Consider hazardous substances (e.g. lead in paint, EU REACH, EU ROHS), security and IP issues (e.g. ITAR/EAR and counterfeit parts), or issues like conflict minerals. Q: What % of your materials are fully controlled and traceable to their origin today? 35.1% 11.7% 10.4% 9.1% 3.9% 5.2% 3.9% 3.9% 2.6% 5.2% 3.9% 5.2% 0.0% 0% 1-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-99 100% (all Dont (none) of it) know / ~ 1 of 4 surveyed have visibility ~ 1 in 4 surveyed have couldnt tell to < 40% visibility to 80%+ Copyright © 2010 IHS Inc. All Rights Reserved. 22
    • Barriers to Action Today Q: What two (2) are most likely to PREVENT your company from acting immediately on this regulation? Other (please specify) 11% None of the above 9% Lack of tools/third parties/services to… 24% Cost of compliance (complexity, time,… 28% Technical feasibility of compliance (practicality… 37% Disbelief that this will achieve the intended… 3% Doubts of enforcement or regulation 13% Technical feasibility to track and trace these materials, followed by cost of compliance and lack of third party enablers, are top obstacles to immediate preparation by companies surveyed. Copyright © 2010 IHS Inc. All Rights Reserved. 23
    • Drivers for Action Today Q: What two (2) needs, risks, or benefits will likely INITIATE ACTION at your company? Other (please specify) 2.5% None of the above 2.5% Positive brand exposure of responsible… 9.2% Opportunity for competitive advantage 3.3% Customer requirements or requests for… 38.3% Continuity of supply risk / assurances 10.0% Risk to brand from negative exposure 10.8% Fear of market share loss to Conflict Free peers 5.8% Need to comply 42.5% At 42.5% and 38.3% respectively, regulatory compliance and customer requests largely outpace any other business needs, risks, or benefits to initiate action among companies surveyed. Copyright © 2010 IHS Inc. All Rights Reserved. 24
    • Key Findings - Conflict Minerals in the Supply Chain • Moderate but growing level of awareness • Mineral use extensive and critical among companies • Difficulty for companies to identify use and exposure • Preparedness low; disclosure requests materializing • Cost and technical feasibility prevent action • Compliance and customers will drive action Copyright © 2010 IHS Inc. All Rights Reserved. 25
    • Taking Action – Get Started Conflict Minerals in the Supply Chain 1. Get an understanding of the issue 2. Get involved in industry 3. Assemble and engage the organization 4. Assess your IT landscape 5. Simulate your response Copyright © 2010 IHS Inc. All Rights Reserved. 26
    • Environmental Sustainability Tools – Best Practices Rory King Director, Global Product Marketing IHS Inc. RORY.KING@IHS.COMVisit booth #103 to speak with IHS and obtain valuable resources. Copyright © 2010 IHS Inc. All Rights Reserved. 27
    • Every Green Issue has a Discontinuous EffectDisruptive ripple effect throughout global supply and demand balance Bisphenol-A “BPA Free” China RoHS Customer RFP Full Material Disclosure EU RoHS Recast Energy Priority Declarable Substances List (ASD PDSL) Toxic Substances Control Act (TSCA) Waste Health Canada / Canada’s Chemical Greenpeace SIN List - Substitute It Now! Management Plan EU REACH & SVHC Security US California Proposition 65Hazardous ISO 14064 GHG Standards DEHP-Free Norway PoHS UN Stockholm Persistent Substances Organic Pollutants (POPS) Air Safety Argentina RoHS Product Content Disclosure EU RoHS and WEEE Thailand’s “RoHS” EU Battery Directive Directives Japan Green ENERGY STAR Carbon Disclosure Project (CDP) Volatile Organic Compounds US FDA Electronic Product Environmental Natural Resources Regional Greenhouse Gas Initiative (RGGI) Health Assessment Tool (EPEAT) PCF - Product Carbon Footprint Conflict Minerals Water Lifecycle Assessment (LCA) EU Medical Device Directive Environmentally Preferred Products (EPP) US EPA Executive OrdersCopyright © 2010 IHS Inc. All Rights Reserved. 28
    • Our Insight Shows Lifecycle Impact of EU RoHS2M+ new parts. Major part changes. Cause of over 20% EOL in „06-07. End of Life (EOL) Specific to RoHS/Pb-free Environmental Compliance EOL 2003 2004 2005 2006 2007 2008 2009 Product Change Notices (PCN) Specific to RoHS/Pb-free Environmental Compliance PCN 2003 2004 2005 2006 2007 2008 2009 New Product Introductions (NPI) Market Shift Specific to RoHS/Pb-free Environm ental Com pliance to EU RoHS NPI 2003 2004 2005 2006 2007 2008 2009 RoHS in Force July 1, 2006Copyright © 2010 IHS Inc. All Rights Reserved. 29
    • Past: 6 Substances Were Very “Costly”Discontinued parts lead to shortages which lead to counterfeit parts COMPLIANCE (explicit) SUPPLY CHAIN & DESIGN COSTS Fines, Penalties, Recalls, Data, IT, Supplier Evaluation…. Obsolescence, Supplier Viability, Material Shortages, Continuity Regulatory event = $160M+ government seizure Japanese Electronics of 1M+ product units due to high cadmium OEM concentration levels found in system cables Recall suspected to violate EU law. Design reliability = $1B+ recall logistics, warranty US Consumer extensions, excessive rework/repair, while Products OEM customer loyalty dipped to resolve reliability Recall issues causing hardware failure. Source: UK MOD PRODUCT PROFITABILITY COSTS SAFETY & SECURITY COSTS Price Variance, Manufacturing Processes, Inventory/LTB… Reliability, Tin Whiskers, Counterfeits… Tin Whisker Images Courtesy of the NASA Copyright © 2010 IHS Inc. All Rights Reserved. Counterfeits and Inferior Grade Components 30
    • Present: EU REACH is a Huge DealEuropean Commission roadmap includes 106 priority SVHC by 2012 “Airbus UK’s director of operations and compliance, said the cost of REACH had been evaluated at several million Euro over three years, with provisions up to hundreds of millions of Euro over five years”… “…*He+ said there is a level of ambiguity because it will depend ‘on the substances that will finally be added to the candidate list and in Annex XIV’. Airbus UK has set its 2009 REACH budget at somedifferent conclusions”, Jane’s, September 2009 Source: “EU and industry REACH EUR12 million.”Copyright © 2010 IHS Inc. All Rights Reserved. 31
    • Future: The Next Shoe(s) Have Dropped… U.S. Conflict Minerals Law: Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law on July 21, 2010. Is BPA (Bisphenol-A) Next? Kaiser Permanente’s October 28, 2010 research announcement concluding, “Exposure to BPA Associated with Reduced Semen Quality.” Copyright © 2010 IHS Inc. All Rights Reserved. 32 32
    • Entire Peer Groups Are Concerned Last October, we held a Webcast called “Redesigning Medical Supply Chains”Over $80B in spend among the Fortune 1000… … and only 1 did not attend our webcast… Copyright © 2010 IHS Inc. All Rights Reserved. 33
    • Sustainability Tools –Best Practices from the Congo’s ICGLRLessons Learned from Africa’s International Conference on the Great LakesRegion (ICGLR) response to Conflict Minerals legislation can illustrate bestpractices in approaching supply chain sustainability, specifically risk/reward. 34
    • About the ICGLRMember States:Angola, Burundi, Central African Republic, Republic of Congo, DemocraticRepublic of Congo, Kenya, Uganda, Rwanda, Sudan, Tanzania, andZambia.Mission:To be an effective and dynamic institution which: Coordinates; Facilitates,Monitors and Ensures the implementation of the Pact and otherinitiatives, in order to attain peace, security, stability and development inthe Great Lakes Region. 35
    • Public Pressure Turned ‘Shocking’SUPPLY SHOCK: “New US legislation regarding “conflict minerals” from theDemocratic Republic of Congo (DRC) is likely to push up the price of tantalumoxide as it could lead to a supply squeeze, Africa-focused Globe Metals &Mining…” Mining Weekly, July 2010 DEMAND SHOCK: “Compliance and our reputation as an ethical company [is our risk exposure]. Our benefit is to make our customers’ lives easier. End consumers shouldn’t be burdened with the task of discerning which products are ethical.” Supply & Demand Chain Executive, November 2010
    • #1 Act Immediately: Design Cycles Exceed Regulatory Timelines in Most Scenarios 37
    • #2: Continuity as Supplier to Market, not “Compliance”, is Your Business Case 38
    • #3: A Platform of Transparency is Key inthe Sustainable Supply Chain Generation 39
    • #4: Standardizing Supply Chains LowersRisk and Cost; Improves Time-to-Market 40
    • CONCLUSIONNot merely “Compliance” but… … a matter of continuity and survival as a supplier to global markets. Copyright © 2010 IHS Inc. All Rights Reserved.
    • For more resources, visit - http://bit.ly/SDCEconflict1104 Copyright © 2010 IHS Inc. All Rights Reserved. 42
    • John Davies VP, Senior Analyst, GreenBiz Group Andrew K. Reese Editor, Supply & Demand Chain Executive Scott Wilson Content Solution Strategist, IHS Rory King Director, Global Product Marketing, IHS
    • www.greenbiz.com www.ihs.comwww.sdcexec.com