Making EMS Companies "Lean and Green" -- EMS companies must adopt good environmental procedures...

When Agilent Technologies outsources manufacturing, the company requires more from its suppliers than technology, quality, reliability, cost and delivery. It also requires responsible environmental practices. According to Harry Reid, facilities manager at Agilent's South Queensferry, Scotland,

In the electronics industry, 20 to 25 percent of products are outsourced to electronics manufacturing services (EMS) companies.1 So, outsourcing trends can significantly affect original equipment manufacturers (OEMs) such as Agilent, either positively or negatively.

Ian McIntosh, risk manager at Agilent, said it well, "I feel that now there is so much outsourcing that it's important to focus on the environmental practices of suppliers. All companies need to study the supply chain more thoroughly. More and more, the public is aware of supplier issues and social issues, too. It's an area we need to strengthen: to be more proactive in environmental reporting."

If you are now convinced that EMS companies need to practice environmental (green) procedures to satisfy important OEM customers, I will describe the profitable (lean) benefits.

For example, at Celestica, the first EMS company to be certified to environmental standard ISO 14000, Frank O'Rourke, manager of environment, health and safety, looks for every possible way to save money because, in the EMS industry, profit margins average well under 5 percent. O'Rourke leaned on his suppliers to help him reduce his facility's $2 million chemical budget by $125,000. "This was hard to do," O'Rourke said, "because some chemicals, such as small epoxy with specific tolerances and high-purity content, are particularly expensive, given that they are custom and specific to the industry."

So O'Rourke "pushes back" on his suppliers, asking them, "How can you help us to meet our reduction plan?" He knows that the chemical industry is quite competitive and that his suppliers want to keep Celestica's business. Therefore, these suppliers are willing to take a longer business view-looking beyond one business deal-to help Celestica meet its cost reduction goals and, at the same time, reduce the use of toxic chemicals.

I asked O'Rourke if, in addition to influencing suppliers, he also influences Celestica's OEM customers to specify leaner and greener processes. "We try to convince customers to switch from brand X to brand Y if we know that Y will be better environmentally and economically," said O'Rourke. "We show the customer our test results with Y and report that it's less expensive." For example, some customers want Celestica to use water-soluble paste or flux, instead of chemicals, as the basis for their water-cleaning process. Celestica then encourages the customers to further reduce costs and resources by switching to a no-clean process.

As quickly as EMS companies are growing, adding as many as a dozen or more sites in a year, EMS management has to evaluate acquisition targets for environmental compliance, then integrate the new acquisition into the parent company's environmental policy.

For example, Celestica's environmental managers from several dozen sites around the world meet semi-annually to receive corporate instructions on chemical management programs and environmental policy. O'Rourke explained that at these meetings the corporate environmental managers describe the company's aspirations and some specific new programs they want implemented. Then they say, "How you do it is up to you; you know your own business. But we'll audit your site to be sure you have these programs in place." This approach is in keeping with Celestica's value system, said O'Rourke, which bases decisions more on consensus than on strict hierarchy.

If you work for an outsourcing OEM, do you know the practices of your EMS suppliers? If you work for an EMS, isn't it about time your company takes lean and green steps for the profit of the planet and your financial statements? And, if you supply either type of company, prepare for increasingly stringent environmental requirements from customers.

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Reference

1. Quarterly Forum for Electronics Manufacturing Outsourcing and Supply Chain, Technology Forecasters, Inc.

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Pamela Gordon is president of Technology Forecasters, Inc., Alameda, CA; www.techforecasters.com.

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