What’s in your product?
Manufacturers worldwide are recognizing the benefits of being able to answer that simple question. Of course, for most products, there is no simple answer.
At the Consumer Electronics Show (CES) last month, Intel announced that all of its microprocessors shipped in 2014 will be conflict mineral free. Intel will continue procurement from Africa, but clear visibility into its supply chain will allow it to avoid conflict mines – and this will pay off big for Intel.
First, Intel’s brand is enhanced by putting distance between its products and the human suffering created by warlords in conflict zones. Intel is positioning itself as a champion of sustainable development with predictable benefits to its corporate reputation for social responsibility.
Second, as companies with less-developed procurement processes flee the region in order to reduce their own brand risks, it is likely that local supplies will increase, causing local prices of the minerals to decrease, reducing Intel’s procurement costs.
But this is only one example of how supply chain visibility can pay off.
Consider, for example, the costs of recalls due to design flaws and counterfeit parts. Counterfeiting goes far beyond currency and is estimated to be a multi-trillion dollar problem worldwide, with obvious health and safety implications.
Counterfeit handbags and shoes get their share of media attention, but consider automobile parts. Aston Martin is currently recalling a significant portion of all the automobiles it has produced in the last seven years due to a counterfeit material in accelerator pedal arms.
Several other ways that supply chain visibility can build value and head off problems:
- Identify hazardous substances. Many markets come with restrictions on hazardous substances. Revelations of such substances can keep a finished product from reaching your customers.
- Reduce end-of-life costs. Recycling regulations impose end-of-life costs on manufactures based on the amount of certain materials in a product. Companies can reduce recycling escrow and negotiate more favorable terms by knowing how much of what materials are in their products.
- Reduce trade costs. International opportunities often come with reciprocal trade requirements. Knowing who produced parts of your product and where can both open opportunities and reduce trade costs.
- Take a proactive approach to regulation. Intel is taking a proactive approach to reducing conflict and increasing fair-trade practices in Africa. As the new conflict mineral law comes into being, Intel has positioned itself ahead of the game. Many more government regulations are pending, and working toward excellent supply chain visibility now will pay off in the future.
- Optimize design. If designers are aware of both regulations and the content of parts, they can more easily evaluate design alternatives that can result in reduced material costs.
- Control material costs. Companies can aggregate material usage across product lines to negotiate volume pricing. Production visibility may even help hedge against changing material costs.
There are many regulatory, humanitarian, and even hard-dollar advantages to knowing what’s in your product.
Learn more about supply chain management and how to achieve supply chain visibility.