Toxin law threatens supply chain

The EU’s Restriction of Hazardous Substances (RoHS) directive, which took effect at the start of this month, could have some short-term impact on pricing and availability of electronics and electrical goods, experts said.

The RoHS directive is intended to limit the use of substances such as lead and cadmium and is one of several rules imposing greater environmental responsibilities on manufacturers. Similar codes in China and South Korea are also imminent.

Mike Bellnier, vice-president of engineering services at storage systems maker Adaptec, said there was potential for “huge disruption” in the supply chain.

“When we changed all the components on our products to comply with RoHS we had to change our manufacturing processes, our handling procedures and our inventories,” Bellnier said. “Some suppliers have been very slow off the mark. If these suppliers come too late to the market with RoHS-compliant products then their reseller customers are going to find themselves out of stock and waiting on kit that could be weeks or months away from the shelves.”

Unlike some others, Adaptec said it will label its goods to demonstrate RoHS compliance. But the vendor believes that nobody will effectively police compliance.

Also, a grey area in the new rules means that non-compliant goods can still be sold if they cleared customs before 1 July and were not stockpiled. That is likely to lead to heavily discounted electronics and electrical goods for the next few months, said experts.

Conrad Mohr, managing director of surplus distributor IT Industries, predicted a “very soft” market for the next three months, adding that he had been offered thousands of laptops, digital audio players and other goods.

In the short term, RoHS could also see scrapping of equipment correctly or mistakenly believed to be non-compliant, and potentially lead to price fluctuations as the supply chain absorbs the cost of compliance requirements.

However, other watchers said it was more likely that vendors will use RoHS as an excuse to introduce price changes.

David Sutcliffe of equipment recycling specialist CKS Group argued that it is in firms’ own interests to do more to demonstrate their green credentials. “There’s a huge marketing opportunity,” he said. “You can design out 80 percent of future waste and people will acknowledge you for doing that.”

Copyright © 2010 IT Week

chainlawstrategysupplythreatens