Helping Companies "Go Green"

i2 developing solution to help manufacturers deal with environmental regulation compliance

Dallas — April 27, 2004 — The restrictions being placed on the usage of certain hazardous materials are driving significant change in the way products are being designed and manufactured. Key regulations such as the European Union's Directive 2002/95/EC, Restriction of Hazardous Substances (RoHS), will go into effect starting July 1, 2006. Companies that do not comply risk forfeiting revenue and market share in those markets covered by the regulations. The entire electronics ecosystem and supply chain stands to be impacted — from component manufacturers and distributors, to the OEMs and contract manufacturers.

In response, i2 Technologies Inc., a provider of closed-loop supply chain management (SCM) solutions, today announced that it is developing i2 Hazardous Materials Management (HMM), a technology-enabled solution intended to help companies deal with emerging environmental regulations and related manufacturing requirements affecting those industries whose products contain electronic components.

The move to lead-free manufacturing is having a wide-ranging impact, thereby creating new requirements for "green" design, procurement and manufacturing. According to a March 26, 2003 AMR Research Report, "The WEEE (Waste Electrical and Electronic Equipment) and RoHS directives affect core business processes and over half of a manufacturer's existing enterprise applications." The report goes on to say, "The WEEE and RoHS directives will have a similar rippling effect on IT systems that we saw with Y2K and euro preparation."

Traditionally, i2 said, enterprise software applications have been available to manage the environmental health and safety aspects of conforming to regulations from agencies such as the Occupational Safety & Health Administration (OSHA), Food & Drug Administration (FDA), Environmental Protection Agency (EPA), and the Nuclear Regulatory Commission (NRC). However, these applications do not address the front-end supply chain technology requirements of engineering, procurement, quality and supply management, which the provider said are needed to enable RoHS compliance and the transition to lead-free manufacturing.

In his April 1, 2004 Research Alert, AMR Research's Kevin O'Marah wrote, "Reactive environmental compliance will be too costly for many manufacturers to survive. Design-for-environment strategies must anticipate worst-case scenarios and the tools to help them should be chosen accordingly."

"Compliance to regulatory standards like HAZMAT will have an unprecedented impact across the entire supply chain. It will transform the way we interact with our suppliers, our customers and partners," noted Greg Frazier, executive vice president of Avnet, an electronic components distributor. "Our customers face a potentially daunting task of migrating millions of items from non-compliant bills of materials. Across more than 125,000 clients, Avnet must aggressively apply processes to assist in this transition. It is imperative that we avoid any disruption in our client's supply chain."

Jeffrey Davis, director of Supply Chain Engineering for Lucent Technologies, is the corporate leader for his company's RoHS and WEEE implementation. In explaining the gravity of the impact of these regulatory changes, he noted that the issues might have greater ramifications than earlier estimated.

"The road to compliance will be measured in billions of dollars of revenue and expense. We may see a true shift in competitive balance as companies hurry to become compliant within manufacturing, distribution and sales," he warned. "The European compliance deadline of July 2006 will force wide-spread changes in the way companies go to market with their products. This shift is already having significant world-wide impact as geo-specific regulations are implemented."

With this information in mind, i2 said it understood that any approach to addressing the environmental requirements must encompass a combination of content, application software and business process. Therefore, its Hazardous Materials Management solution begins with content, which provides the information core for the hazardous materials management environment, including material and substance data, manufacturability data, and the information requirements for item, supplier and product data.

The application software is then used for information management and product decision support. i2 said HMM is being developed with capabilities for content management, component and supplier management, design for environment, product analysis, and reporting. The solution will be designed to extend to include strategic sourcing and supplier management.

According to Peter Lachapelle, i2 vice president, Content, "These new regulations force companies to review items included in all bills of materials for both existing and new products. To truly 'go green,' the industry is going to need detailed information on millions of items from thousands of suppliers. Many clients are underestimating the time or effort required to create standardized HAZMAT information for each item."

The impact on information technology (IT) is perhaps as great as any other part of the company, added Tony Grzesik, i2 vice president, SRM. But, generally speaking, IT has been slow to react. This is partly due to the economic realities of the past few years, wherein IT budgets have been significantly reduced from prior levels. Another contributing factor is a lack of education on the topic.

"Companies are now scrambling to make up for lost time, and they need third party help," Grzesik said. "Most companies don't have the luxury of resources, time or expertise to do this on their own."

That why, he said, i2's ability to address the problem makes sense, given the company's content and sourcing solution heritage. "We are building the solution based on our technology and best-practices experience in the areas of content, product sourcing and supply management, which should allow us to offer customers shorter time-to-compliance and lower total cost of ownership."

Grzesik concluded: "The next two years will be challenging times for product development, supply management, manufacturing operations and IT. They will need to deal with product re-designs, supply shortages, manufacturing line changes, regulatory compliance reporting, and new information management requirements."

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