PLM Strategies-PLM: Pathway to Compliance31 May, 2005 By: Arnie Williams
Government regulations challenge manufacturers.
Consider the cellular phone. Once large and crude and purchased by a few curious technophiles, the cell phone has quickly become ubiquitous. Time to market is particularly important because cell phones have a short lifecycle. Last year's phone often ends up in the garbage, which means eventually it makes its way into landfills and leaches nasty chemicals into groundwater supplies.
Regulators in the EU (European Union) are aware of those chemicals. In early 2006, manufacturers of products such as cell phones must have recycling networks set up and by the end of 2006 must meet recycling targets, all part of new EU WEEE (Waste Electrical and Electronic Equipment) regulations. This will be followed by directives for RoHS (Restriction of Hazardous Substances). No matter where a product is made, if its suppliers are in Europe, if it has parts manufactured there, or if it's sold there, all companies involved are subject to these regulations.
Europe isn't alone in passing laws to address compliance issues. In the United States, SOX (Sarbanes-Oxley Act) has been passed to scrutinize corporate finances of publicly owned firms. The Food and Drug Administration also enters in with regulatory oversight over manufacturing.
A recent report by AMR Research indicates that in the next four years, businesses worldwide will spend more than $80 billion to meet regulatory compliance demands. In 2005, more than 80% of companies will increase efforts to meet SOX reporting requirements, and more than 67% will pay attention to other compliance projects. The trend promises to increase as regulations become more stringent and enforced globally.
PLM—A Tool Made for Compliance"With $15.5 billion predicted for spending on compliance-related activities in 2005 to track regulations such as Sarbanes-Oxley and others, you can bet we're seeing compliance on C-level agendas at companies," says Bill Boswell, senior director of Teamcenter Product Marketing at UGS.
Boswell suggests that the best way to achieve compliance is through effective reporting. And to report on data effectively, he says, you have to do a good job of capturing it. This can be a challenge for manufacturing companies. They design and manufacture some parts of their products. Other parts are built to order or procured from suppliers. To be compliant, he says, companies must manage data for not only the parts they manufacture, but also parts purchased from or built by third-parties.
Some companies must restrict access to sensitive data within their own companies. Others, especially in high-tech, must track and protect data to prevent disclosure outside certain countries. Add to the mix quality-compliance standards such as ISO that require close scrutiny of manufacturing processes and change management, and you have a quagmire that can bog a company down.
These are the problems Teamcenter and other PLM solutions are designed to address, says Boswell, who foresees that companies of every size will bring their data into line with demands for reporting accuracy and material control.
Complying UpstreamThe design stage is a logical place to begin thinking about compliance, says Chad Hawkinson, director of strategic marketing, electronics and high technology at PTC. Electronic compliance regulations such as EU's WEEE and RoHS carry over into other industries such as medical devices, he says, which use electronic and hazardous substances, and are not completely covered by exemptions to these regulations.
Tim Dombrowski, vice-president of business development at PTC, adds that process controls also loom large in efforts to meet compliance demands. "PLM can play a key role in process control," he says. "For years companies have had 'point solutions' to address such things as corrective action requests that come in from the field. Other point solutions might track compliance that has to do with quality management—a key issue for some of the biggest players in the manufacturing industry. PLM is the perfect one-source system of record to bring all of this data under one system," he says.
Compliance MythsAgile software has built its PLM system around compliance demands. A report by the Aberdeen group and sponsored by Agile notes that only a third of manufacturing companies have aligned their compliance and product-development organizations. The report further reveals that two-thirds of product companies lack insight into the regulatory, environment and operational rules that affect their products. Finally, 80% of manufacturers lack a cohesive infrastructure to track, audit and manage product compliance.
So how did the industry get so out of line, considering the all-pervasive impact of compliance regulations coming into play this year? Agile asked Pamela Gordon, president of Technology Forecasters, to look into the reasons behind industry's slow response. She identified five myths.
Myth #1Compliance is only an engineering issue. Gordon's advice is have multifunctional team that represents key areas, such as manufacturing, procurement and marketing, and make it accountable to the CEO. There is little time for internal debates about who's responsible for compliance tracking.
Myth #2Compliance is a future problem. An OEM that waits too long to begin compliance reporting could lose its place on approved vendor lists. Gordon notes that it can take suppliers a minimum of six months to prepare for compliance reporting and more realistically, 18 months for manufacturing changes.
Myth #3Companies operating within the United States can avoid regulations imposed by other countries. Companies that ship worldwide, supposedly avoiding Europe, might still have Europe as a stopping-off point. Moreover, other countries, such as Japan, have compliance requirements in planning that are even more stringent than those in Europe.
Myth #4Manufacturers rely on suppliers to comply. This is a dangerous path because producers are ultimately responsible for compliance, Gordon says, and the buck will stop with them.
Myth #5Once a directive is met, work is done. On the horizon are regulations to reduce power levels in equipment, prevent ozone depletion and more. Compliance, notes Gordon, is not a short-term project that has an end date.
Solving One and Many ProblemsPLM developers are attempting to create an overarching system that, with add-ons, can help companies create an audit trail to satisfy stringent regulatory agencies. With companies predicted to spend $80 billion in the next four years on compliance alone, PLM promises to play a key role.
Arnie Williams, former editor-in-chief of Cadence magazine, is a freelance author specializing in the CAD industry. E-mail him at email@example.com.