The Realities of Manufacturing Today
Nowadays manufacturers are increasingly subject to massive pressures due to the need for driving down costs and increasing efficiency. What makes things worse is that with product life cycles decreasing, manufacturing and distribution are increasing in complexity. This, for the manufacturer, translates into a need to better manage customer demands and expectations and to respond accordingly. Furthermore, manufacturers of electrical and electronics equipment must comply with a growing array of strict environmental regulations, many of which have already been implemented in the European Union (EU) and the United States (US). More regulations are pending in Japan, China, and other countries. As in many other industries, the cost of compliance can be high, but the cost of noncompliance can be far greater. Thus, the industry winners have to gain the capabilities they need to adapt their businesses to meet regulatory requirements—from product design to compliance reporting, and from sourcing and procurement to service and repair—so that they can avoid costly penalties and product recalls, optimize processes to comply with changing regulations, build trusted brands, and protect shareholder value.
Such manufacturers will have to turn somewhere to comply with these high-tech and electronic industries' significant and stringent environmental policies. Specialized, private marketplace service providers that offer auction platforms to off-load a company's excess and obsolete (E&O) inventory are the logical outlets for manufacturers to use in order to ensure compliance with these new regulations. Ideally, these providers should have an established number of treatment recycling and transportation management company partnerships. An environmental policy came into effect in August of 2005 for member states of the EU. The Waste Electrical and Electronics Equipment (WEEE) Directive 2006/96/EC sets recycling and reuse standards across a variety of industries from home appliances to computer products. The WEEE directive holds the manufacturer (producer) ultimately accountable for recovering products and for recycling up to 75 percent of the material content by weight. Failure to comply results in the manufacturer paying a penalty of 2 percent of its annual revenue. In other words, the WEEE directive establishes rules for the collection, treatment, recycling, and recovery of electronic waste in the EU. It states that electronics manufacturers and importers must manage and pay for the recycling of electrical and electronics waste.
In addition, the WEEE legislation's directive states that electronic product manufacturers, excluding retailers and distributors, are responsible for providing take-back programs for all electrical and electronic equipment sold in the EU's member states, as well as in Norway and Switzerland. The directive defines, prescribes actions, and sets regulatory milestones for the collection, treatment, recovery, and financing of discarded electrical and electronic equipment across ten product categories. These ten categories range from information technology (IT) and telecommunications equipment, large and small appliances, and tools to toys and leisure equipment. Naturally, product reuse (that is, the resale or reuse of whole appliances for their original intended function) is to be given priority over recycling. For IT equipment, telecommunications, and consumer electronics that do not have a whole product reuse option, 75 percent of the product weight must be proven to be recycled. New products must be marked with "do not trash" symbols, and information on product disassembly must be provided by manufacturers. The target date for commencement of these programs was August 13, 2005. Since then, the EU member states have been obliged to provide for the financing of the collection, treatment, recovery, and environmentally sound disposal of waste electrical and electronic equipment. They have had to set up separate collection systems to eliminate the disposal of such products into municipal waste. To that end, distributors must ensure that waste of the electronics equipment can be returned to them free of charge, and manufacturers must set up and operate individual or collective take-back systems.
Since December 31, 2006, EU member countries have had to meet WEEE recycling targets in that the rate of recovery for IT, telecommunications, and consumer equipment is at least 75 percent, which is measured in terms of average weight. Manufacturers must now state the weight of the electrical and electronic waste entering and leaving treatment and recovery or recycling facilities. Member states must draw up a register of manufacturers along with the quantities and categories of electrical and electronic equipment placed on the market, collected, recycled, and recovered in their territory. Each member state must also transpose the WEEE legislation into local law, which is where local differences create WEEE compliance reporting issues even though there is general adherence to the EU level directive. The task of monitoring manufacturers' sales in volumes to each country (for the purpose of establishing recycling quotas) will fall to a member state's agency working under the direction of its national Office of the Environment as the managing authority for WEEE. On their side, manufacturers must register up front with each country's authority for the purpose of reporting recovery and recycling results. The initial recycle quota is set at a relatively low bar of 4 kilograms per capita per year, although countries such as the Netherlands have had established programs that exceed this volume for years.
Although the WEEE directive has jurisdiction only over the EU, most multinational electronics and telecommunications companies will implement the infrastructure and IT necessary to manage compliance processes on a global basis. They do this in anticipation of similar legislation in other regions and to maintain worldwide process standardization. With legislation like WEEE, supply chain management (SCM) and product lifecycle management (PLM) have become cradle-to-grave endeavors with significant depth and complexity added to the reverse logistics process. But an even bigger burden might be the requirement for manufacturers to recycle a portion of electrical and electronic waste made way back when, which seems a daunting task, and the specifics of how it will work exactly are still largely unknown.
Whichever option a manufacturer chooses, it can envision the following three-step process to ensure an integrated and compliant inventory asset recovery:
As for proving compliance, compliance reporting of the required percentage of reuse and recycle will be aggregated by weight per time period. The provider of specialized, private marketplace auction services would store product weights cross-referenced to product categories for reporting and reconciliation. Whether reporting is aggregated by weight or detailed by product category, the compliance portal should capture the requisite source data in the three steps above. Combined reuse and recycling data would then be stored in the same database to simplify the reporting process and to ensure compliance with a minimum of overhead. The information generated should help the recycling company iron out collection inefficiencies in the short term, while on the other hand, it could affect product design in the long term for the manufacturer. One could imagine how useful feedback from the recycling facility could be, even if it is something as simple as a list of products that create the highest costs because they are hard to take apart.
Still, despite their existing solutions' fit, some private marketplace auction services providers have made the strategic decision to defer officially entering the WEEE space until the legislation is more clearly defined. In other words, they are taking a pause while the legislation evolves and the EU market matures, especially across the greater EU (let alone other, less environmentally friendly global regions). This is but a small reprieve for affected manufacturers and importers to "catch their breath." They should definitely start to devise strategies on how to comply at the end of the day, since it is only a matter of (not too long a) time before the WEEE legislation resolves any kinks it may currently have.