Easing the Burdens of Compliance

| February 23, 2016 | 0 Comments

barbjorgensenElectronics businesses undoubtedly have more compliance challenges than they ever had before. Along with stricter environmental regulations in the U.S., foreign markets are adopting even more stringent guidelines. U.S. government edicts such as Sarbanes-Oxley and the Dodd-Frank Act require a deep level of transparency into corporate financial transactions and foreign business practices.

This, in turn, has added to the burden on companies to identify, track and declare all kinds of data. A global component manufacturer that uses tantalum in its products had added staff in recent years just to keep up with the conflict minerals requirement in Dodd-Frank. Then there’s the alphabet soup of regulations (NDAA, DFARS) for any company doing business with the U.S. military.

The current regulatory environment puts electronics distributions in an interesting situation. Although in most cases distributors aren’t subject to these regulations – they don’t manufacture electronics products – they are looked upon by customers as an important source of information. Companies that don’t deal directly with component suppliers may never even “see” an Intel, AVX or Vishay.

Regulations such as RoHS, WEEE and Dodd-Frank apply to original component manufacturers (OCMs) or OEMs. Conflict minerals regulations require manufacturers to disclose whether or not they buy minerals such as tantalum from conflicted regions in Africa. RoHS and WEEE ban materials in end-products outright or require the contents of the end product be disclosed. Not surprisingly, customers that buy a variety of components through the channel ask distributors – not suppliers – for materials and other declarations.

There’s a certain level of data that automatically passes through any distribution transaction. Authorized distributors, for example, pass on supplier warrantees directly to customers. For all intents and purposes, dealing with an authorized distributor should feel the same as dealing with a supplier.

The reality is, however, that collecting some data from suppliers is difficult for distributors. Some components may contain only traces of a targeted material; or suppliers consider the composition of their products to be proprietary. If they do break down the composition of their parts, the data may be buried deep within a generalized compliance statement.

The distribution channel has been harnessing digital technology to make this information more accessible. For example, some suppliers may list the contents of their products on their website. They may have corporate compliance sections online. They may share certain information only to trusted suppliers, or they may release information only when it is asked for.

Verical.com, a division of authorized distributor Arrow Electronics Inc. uses a digital platform to compile, organize and share data. Verical audits each of its inventory suppliers for standard information such as component batch numbers, date codes, certificate of compliance and product specs. In addition, Verical audits suppliers based on their primary business. OCMs, for example, may be asked to share RoHS, WEEE and other compliance data. Authorized distributors are asked about their sourcing methods and counterfeit-mitigation strategies. All of this information can be provided digitally to Verical customers through an API or other link directly to buyers.

Verical’s business model has been designed to create the most frictionless environment possible. It has a selection of more than 700 suppliers and more than $10 billion in inventory. It captures component, trade and compliance data from all of those suppliers. It passes that information on through portals and tools that can be integrated into its customers’ supply chain systems.

“Data transparency helps facilitate a seamless transaction for customers and the confidence that Verical has taken the right steps – and that we have the right supplier programs and breadth of inventory – that prevents customer from having to go to multiple partners for sourcing,” according to Dan Schoenfelder, Verical’s director for supply chain optimization.

Compliance requirements can be overwhelming and companies have to be able to rely on their partners to provide the right information. As a publicly traded corporation, Arrow Electronics has to comply with a myriad of state, federal  and international regulations. As a division of Arrow, Verical can pass that compliance through to its customers.

Verical then drills down to the issues that matter to most electronics customers. Making that data easily accessible—i.e., transparent – alleviates some of the burdens associated with conducting business in a global regulatory environment.



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Category: Featured Blogs, News Analysis

About the Author ()

Barbara Jorgensen is managing editor of Electronics Purchasing Strategies. She can be reached at barbara.jorgensen@epsnewsonline.com

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