Searching the path towards sustainable chemical substance reporting #8 - Implement and Maintain A Material Declaration System

This is the last post in the series articles relating to chemical substance reporting. We will conclude the series by looking at ways to implement and maintain a materials declaration system:

Material Declarations

What Is A Material Declaration?

A material declaration can be considered as a supplier certificate of conformity that discloses which substances which are contained within an article, or used in the process of manufacture, against a declarable substance list.

The material declaration is usually made against a declarable substance list, which could be (a) a regulatory substance list; (b) industry substance list or (c) an organisation specific substance list.

Implement A Material Declaration System

Figure 1: Implement A Material Declaration System

It is really easy to move into 'full steam ahead mode' and rush out a material declaration system, which results in end-user apathy, as lack of real qualitative data from the supply chain.

1. Declarable Substance List

The larger the list of chemical substances an organisation, requests it's supply chain to report on upon, then the longer the data flow will take up and down a relevant supply chain.

There should be a clear alignment of expectation when transmittal of supplier declaration requests are initiated, and the expected qualitative data returning from the supply chain:

• Initial Distribution: Any substance list will take time to filter down all applicable supply chain tiers. The general expectation should be 18-24 for initial data responses to appear. It will take up to 36 months before any new substance list can be considered as mature within any industry and capable of yielding good qualitative data.
• Small  Size Substance List: For very obvious reasons, the smaller a declarable substance list is in size the more palatable it will be to flow down a supply chain. Suppliers are more likely to respond to a declarable substance list if it is within the same substance list size as per existing chemical regulations.
• Medium Size Substance List: Creating a medium size substance list (400-500 substances) is the most logical list size when you wish to illicit additional substance data from a supply chain, that does not overburden your supply chain.
• Large  Substance List: Large substance lists can work, such as the General Automotive Declarable Substance List, however they can take several years to embed correctly. Implementing a large substance list (>1000 substances) as your initial declarable substance list, is not a good idea, as the data flows will take a very long time to flow across a supply chain.

Figure 2: Declarable Substance List Size to Data Flow

The larger the declarable substance list size, the more time the data flows will take to become established. Be pragmatic start with a realistic declarable substance list size initially then expand as the material declaration process becomes established

2. Material Declaration Template

A material declaration template is the form used to collect the material declaration data. In the following sections we will examine practical steps to creating a usable material declaration template:

Understand File Formats

This was covered in Post#1.

1. Understand the data formats used within your business.
2. Understand the data formats used across your supply chain, not just tier 1 suppliers, but those at the very lowest tiers as well.
3. You will encounter multiples types of data formats, at multiple software versions. Assess them all, and baseline the most commonly used formats.

Identify The Data Elements You Are Trying To Capture

A data element is a piece of information you are trying to capture, store and analyse later. The very first step in the process is to get a piece of paper and list down all the data elements you are trying to capture:

• About You - What are the data elements which identify your organisation.
• Your Supplier - What are the data elements which identify your supplier?
• Declarable Substance List - List of chemical substances you want suppliers to report against.
• Product Data - Basic part number data.
• Substance Data - Chemical substance data found in parts supplied.
• Conformance Statement
• Query Statements - Specific statement(s) you would like a supplier to respond against, for example does the supplied article contain a conflict mineral substance? or Does your article contain any substance from your declarable substance list? (enables an all clear declaration to take place).
• Attachments - Enables a supplier to attach data such as Lab Reports or other information to a material declaration.

Figure 3: Basic Building Blocks (a)

Expand the Data Elements

Taking the basic building blocks as an initial starting point, additional data elements can be attached to each section, to derive a basic material declaration template.

The figure below is a really basic skeletal set of data elements, which can be applied to a range organisations in multiple industries, it is not meant to a complete list of data elements. Please view this just as a basic starting point example:

Figure 4: Basic Building Blocks (b)

The <process only> tag is used to show if the substance appears on a article as a result of the process of manufacturer, it is not contained within the finished article.

BOM levels have been depicted to ensure that the tier 1 suppliers can transmit the material declarations to lower tier suppliers for sub-component / substance or mixture information.

Please remember a material declaration will occur flowing down from one tier to another, the assumption is that as a material declaration request is submitted DOWN from one tier to another, the data when returned will flow back with additional data on lower level part data. It is assumed that the final material declaration will contain all the lower level part numbers rolled up (sent UP the supply chain). This processing needs to be clearly shown within any training materials.

Material declaration templates work best if everyone within an industry uses them. To make them work, every actor within the industry has to arrive at the same data element understanding and substance calculation methods.

Develop Use Cases

Having developed a material declaration template alone will not be sufficient, you will need to develop use cases to explore how effective your designs will be in a real world scenario.

Conceptualise how data will be transmitted and received. If we take the example shown in figure 4, we can use the following table to highlight, some conceptual use cases:

Figure 5: Example Use Cases

Work through a number of different use cases as you develop your material declaration template design.  Ensure you use simple English to define data fields.

Examine Data Exchange Standards

In the context of material declarations, a data exchange standard can be seen as a means of reporting chemical substance data in a more consistent manner across multiple parties within a supply chain.

Data exchange standards are important to understand as they automate the process of business to business communication, which will enable a more rapid data flow of the material declarations across a supply chain. 

We will now briefly examine some data exchange standards:

Figure 6: Data Exchange Standards

If you keep the material declaration template design in-line with the data elements within existing data exchange standard, then you will benefit from greater ease of use/acceptance from lower-tier suppliers who supply multiple industries which utilise existing data exchange standards. 

Keep it simple, keep it in line with existing elements if you can, if your template requires additional data elements to be created against an existing data exchange standard, don't be afraid to ask for those elements to be added, the data exchange standards committee's are open to new ideas.

However be aware where one standard is based on a particular industry model, the needs of the industry model may take precedence over your organisation needs.

When working with data exchange standards, it is really crucial your organisation fully understands how the substance mass reporting calculations are assumed, they can be very specific or open.

Ensure you understand substance mass reporting. To avoid adding complexity, ensure substance mass reporting is uniformly agreed. Avoid the use of wide ranging optional values it will cause supply chain confusion, keep it simple. 

Material Declaration Template Design Summary

The material declaration template should be seen as the form in which data is collected from the supply chain.  The SlideShare presentation below highlights some best practices when designing material declaration templates:

 

3. Identification of Test Data Suppliers

When identifying test data suppliers, be clear to target suppliers where you know you have little or no substance data, available.

4. Supply Chain Engagement

Supply Chain Mapping

Supply chain mapping was covered in Post#2. The need to perform even basic supply chain mapping should never be under estimated. The more you understand your supply chain tiers, the more you can target known tiers where information gaps exist.

Often the lowest tiers flow data in the correct manner, in that a substance manufacturer; substance refiner; formulator and distributors will flow information such safety data sheets / lab reports / conformance certificates correctly.

Known Unknowns and Unknown Unknowns exist more in the middle ties of your supply chain than anywhere else.

However the data often gets lost in the middle tiers, this is where the biggest information gaps  can arise, in that there is a melting pot of unprocessed data, compliance and therefore business risk waiting to be exposed.

This may sound dramatic, but in reality, the middle tiers often have trouble calculating the data, but unless someone is asking for the information, in a simplistic manner,  it is not necessarily being passed along the supply chain, in a expedient manner.

The grand vision of regulations such as REACH, encompassed a belief that if material declaration requests flowed from the highest supply chain tier downwards, then eventually the data flows would be at the lowest tier and then flow upwards.

Engage With Suppliers

1. Engage with your supply chain as early as possible.
2. Make initial contact with some suppliers to discuss the proposed material declaration template.
3. Encourage your supply to participate in a pilot to use the proposed material declaration template. This can be an extremely time consuming and exhaustive process, sending several hundred emails may result in a less interested suppliers than you would otherwise think.
4. The benefits of the material declaration process should be presented clearly to a supplier. Just as your organisation is at risk from potential compliance and supply chain risks, your suppliers are also face the same risks.
5. Ensure your suppliers inform you of any constraints they face.
6. Ensure your understand the issues your suppliers face, offer them support.

5. Prepare Training Materials

Ensure you have adequate training media, with which to engage your supply chain with. This training media HAS to cover every single data field which is collected in the material declaration template, explaining how the data is derived and updated, showing various methods of completion. For example if you ask for volumes of substances in a mixture - be clear on how a supplier should collate this data and report back.

Figure 7: Material Declaration Pilot (a)

6. Perform A Supplier Pilot

With an agreed set of suppliers, perform an initial training activity either as a face to face event or via online web conferencing / training media.

Do not use companies which are part of your business group, within a pilot, this just skews the data quality responsiveness of the pilot, in that fellow business units will generally be more compelled to respond to material declarations requests and therefore accept errors and omissions whilst an external entity may report back in a more honest manner.

Perform the material declaration pilot. Allow suppliers a fair period of time from receipt of the material declaration template to update and respond to it, as part of the pilot activities.

The MINIMUM period has to be 2-3 months to complete and feedback data.

Create a survey monkey type questionnaire to get feedback from suppliers.

Figure 8: Material Declaration Pilot (b)

The figure below presents anticipated timescales for a material declaration pilot for a large size organisation, sending material declaration requests to tier 1 and tier 2 suppliers:

Figure 9: Material Declaration Pilot (c)

7. Lessons Learnt 

When reviewing the results of a pilot be sure to collate and record:

• How many potential suppliers were contacted by participants in a pilot?
• How were the suppliers contacted?
• How many suppliers were approached and how many agreed to respond initially?
• How diverse were the suppliers who agreed to participate - by this I mean where they all tier 1 type suppliers or several tiers down within your respective supply chain.
• How many suppliers agreed but did not send any completed materials declaration templates?
• From the received material declaration templates, how many were received completed and received incomplete material declaration.

Record the response rate in terms of data that was completed material declaration templates (correctly completed) as opposed the number of suppliers originally approached.

This data should be presented back in the analysis documentation to show just how well the material declaration template was received by a supply chain.

Expect Some Redesign

Expect the initial Material Declaration Template to undergo a number of iterations, ideally with mini-pilots until you are able to arrive at a material declaration template which can be deployed to your wider supply chain as a whole.

Typical Supplier Response Rates

Response rates can be defined as the number of completed material declaration templates you receive back from your supply chain, measured against the total number of material declaration templates submitted throughout your supply chain.

If your material declaration template is too complex and time consuming to complete, then it will take a while for the data to flow back to you.

A realistic working assumption would be to expect for an initial material declaration template a response rate of less than 20% for an initial pilot.

This means in reality you will receive 20 completed responses back from a supply for every 100 material declaration templates which are distributed to you supply chain.

If your material declaration template is overly complicated, with a more complex declarable substance list, then this figure will be greatly reduced.

Implementing a Material Declaration System Summary

The SlideShare presentation below highlights some best practices when implementing a material declaration system:

 

Maintaining a Material Declaration System

Simply implementing a material declaration pilot is just the start of the process. We shall now consider how to embed  and maintain the material declaration system within any organisation:

Figure 10: Implement A Material Declaration System

The sections below are aimed at helping you consider ways of maintaining the process:

1. Information Needs

Keep in perspective, your organisational needs for the material declaration process:

Figure 11: Information Needs For Material Declarations

This message should be used to ensure senior management buy-in to the material declaration system.

2. Define Data / Process Flows

Examine Data Flows

Examine internal functions to see how data flows across the organisation, the following functions are merely shown as generic examples. Examine your organisation to see which functions could perform which actions as part of a material declarations system:

• Materials Function - Define material and process specifications which call out applicable mixtures and substances.
• Design Function - Produce the geometry data, using the applicable specification data from the materials function.
• Engineering Function - Take Material and Design function definitions to produce detailed definitions for the production of articles.
• Purchasing Function - Procure articles, mixtures and substances; Manage suppliers.
• Supply Chain - Provide substances, mixtures, articles; provide customer declarations where there articles contain substances of concern above threshold limits.
• Compliance Function - Analyse data related to the chemical regulations; substances and mixtures on hand; supplier declarations  to derive potential business risk data; including the possible generation of customer declarations and safe use guidance data.

Figure 12: Identify Data / Process Flows (a)

Stakeholders need to be identified and engaged as early possible. The best advice I can offer is to develop a mind map from the initial process flow mapping.

Material Declaration System Mind Map

The figure below presents a very simplistic mind map of the material declaration process:

Figure 13: Identify Data / Process Flows (b)

Define Ownership of Material Declaration System

It is essential to define which function will handle the material declarations system from a very early point in the process. Material declarations can be handled by several functional areas (Purchasing; Materials; Engineering; Compliance; Health and Safety). One function should assume overall task ownership, and engage the other functions as stakeholders.

A lot of time can be wasted defining ownership of the materials declaration system, the sooner definition takes place, the quicker the system can be implemented.

Stakeholders

A basic understanding of process flows is essential to engage with all relevant stakeholders within your organisation. This requires a strong leadership and good communication skills. If stakeholders are not fully engaged, and understand how the material declaration system works, it is likely to lead to issues downstream.

Having regular constructive feedback sessions with stakeholders is critical for a well maintained material declaration system. without feedback as when and received, people will not know when change is needed. Good management of a materials declaration system requires good communication.

Develop Process Documentation

• Don't just make assumptions on how data should flow.
• Create process documentation.
• Review with stakeholders.
• Rework as applicable
• Ensure everyone understands methodology.
• Above all communicate and make sure communication flows back regularly and not in ad-hoc review sessions.

3. Clean Up Data

This is a key step which organisations unwittingly avoid, prior to launching a full blow material declaration system, ensure the data you have is not just rich but ensure the data is as clean as possible:

Figure 14: Clean Up Data

This is a really crucial step, if you have lots of internal specifications which call out numerous alternate mixtures and substances, and you then ask a supplier to provide data using the material declaration template, the initial response may well be that your organisation already has this data, and or the it has been provided by your organisation to the supplier in a poor uncontrolled state, then, you will obviously be receiving the data back in the same state.

Understand the need to cleanse specification data. Avoid the use of common local substance names; remove redundant data. Properly configuration manage the specification to substance data - even if it means the cost of introducing several new specifications, this is  more logical state for substance traceability rather than too many mixtures and substances defined against a single specification - this can lead to false-positive reporting. Save downstream time and resource costs by having clean specification data.

Clean up all your specification to mixture to substance data.

4. Establish Supplier Engagement

Embedding a new reporting requirement upon a supplier may mean a change to existing contract terms. Supplier agreements are often signed for medium term durations (3 to 5yrs) to enable both the customer and supplier to mutually benefit, from the agreement terms.

Chemical regulation substance reporting needs can evolve quite dramatically over a short period of time. Just think of the how RoHS, REACH chemical substance reporting in a relatively short time span.

The best advice in this area would be to avoid defining specific regulations / standards within a supplier agreement. Use general terminology first 'Respond to global chemical regulatory reporting needs as required' then in a separate clause or statement state a table of regulations [Your list of regulations / standards] which will be annually reviewed.

If you use very specific terms in your supplier agreements, you may find your suppliers will only respond to chemical substance reporting to the agreed initial formats only.

Things change over time, a current industry standard may get displaced with a different standard quite rapidly, and the two standards may not be compatible with each other, your supplier is only going to provide according to what is stated in the original supplier agreement, and most likely charge you additional reporting costs for new standards.

'Respond to global chemical regulatory reporting needs as required' as opposed to 'provide chemical substance reporting as defined in standard xxx'

Good training and guidance materials should be made available to your supply chain, if you are requesting chemical substance reporting which goes beyond the chemical regulation and industry norms.

Suppliers will need to be convinced of the need to report both mixture and substances found on supplied articles but also those used in the process of manufacture. The business risk impact needs to be clearly explained to them.

Organisations need to understand that suppliers will request additional financial costs to meet the additional chemical substance reporting needs. To avoid costs spiralling ensure:

• The data presented to suppliers to report is clean, as possible.
• Any reporting methods (where % of a substance in a mixture applied) is logical and simple to follow.
• Ensure good quality training available.
• Support is available.

5. Frequency of Initiation

Think about the frequency of any future material declaration request(s).

If you have relatively short lead times (design > build > distribute) then you may be inclined to request at a more frequent time frame than an organisation with much longer lead times.

There is a trade-off here with the size of declarable substance list. The larger the declarable substance list size to cover longer time frame chemicals being regulated, leads to a much longer time it takes to illicit supply chain responses

Who will initiate the material declaration reporting you or your supplier?

Consider:

1. Changes to Supplied Articles - Supplier reports as and when changes to mixtures and substances occur.
2. Annual - Supplier reports on a annual basis.
3. Bi-Annual - Supplier reports on a bi-annual basis.
4. Regulatory Changes - Report as chemical regulation lists change.
5. As-Requested - Supplier reports as requested, covers ad-hoc substance information requests (in addition to the above)

6. Methods of Data Exchange

Assuming  you have developed a good material declaration template, think about how you would like to transmit and receive data in the template, lots of different methods exist, you may find your organisation arrives at the most suitable method by trial and error. The figure below shows some common methods:

Figure 15: Methods of Data Exchange

Ideally you would use one of the following methods:

• Spreadsheet Form - Good starting point, but has limitations. Assume form is collated and sent manually via an email to the supplier.
• XML Form - Allows for simple data transmit and receipt. Ideally any solution you implement should allow for a XML file to outputted which can then be used in other systems. Assume the XML form is collated and sent manually via an email to the supplier.
• Supplier Portal - Assume your organisation has a externally facing web portal for suppliers to make contact; submit data; receive documentation. This would be a simple place to store a Material Declaration Template and possibly receive the completed declaration back (unless your spreadsheet has a function to email the completed data). You could possibly have the material declaration template form as a web page where the data is collected. The point here is, you do not have any manual process of collating supplier data and transmitting it to the supplier for completion
• Centrally Hosted - Assume an external organisation hosts a service to manage the process of supplier declaration form transmittal and receipt. There are numerous example such as the IMDS solution for automotive industries and numerous service providers as in the electronics industry.

Start with a simple approach for material declaration form transmittal and receipt, such as the Spreadsheet form. Over time as everyone in the industry adopts the common form, the needs of the industry will be served best by centrally hosted solutions.

7. Declaration Management

Ask yourself a simple question, does your organisation have sufficient resources to manage the material declaration transmittal and receipt process?

Consider the amount of resource and effort required to manage the material declaration process. In the figure below the idea is the process of material declaration processing is handled by an outsourced third party which transmits and receipts the material declaration template data:

Figure 16: In-House or Outsource

This is a classic cost versus benefit model, what is going to be the most expedient manner in which supply chain material declaration data can be received from the supply chain?

Think of make or buy decision making, do you want your organisation to waste resources to chase material declaration data? or do you want to act on data provided from supply chain? 

8. Declaration Monitoring

Metrics

Earlier on we discussed the need for a simple set of metrics to monitor:

• The amount of suppliers were contacted to provide a completed material declaration template for articles.
• Response rates.
• Quality of data - complete / in-complete.
• Amount of positive hits against substances supplier declared which were on a declarable substance list.
• Positive declarations - The amount of suppliers were contacted to provide a positive material declaration template for article. Response rates for positive declarations.

9. Data Analysis

When the supply chain completes the supplier declaration data that you have requested in a material declaration template, what will you do with all the data?

This may sound like a silly question, in reality most organisations do not think through what they will do with the data flows coming back into their organisations.

Data Collation and Storage

Collate and store data from a material declaration template using standard Extract, Transform and Load (ETL) processes.

The data could theoretically be stored in a spreadsheet application where there are not excessive amounts articles with declarations.

In reality for a large organisation, this material declaration data would be stored in a corporate database or business warehouse type solution.

Impact Assessment

• Initial Reporting - Prior to material declaration template processing identify which articles have internal specifications which have substances shown on a declarable substance list. This will enable your organisation to validate date in specifications (internally with materials function); contact suppliers who provide articles with applicable material declaration templates.

Declarable Substance Lists

Analyse the impact of additional substances being added to a declarable substance list, only useful if the supplier has provided a full material declaration.

10. Risk Mitigation

Positive Declarations

When a material declaration template is received back from a supplier, which contains a substance on the declarable substance list, consider some simple next steps. You have a supplied article, it is a potential supply chain risk to your organisation what should you do?

Simple, ask the supplier for some additional information, you may choose to do this either as another declaration template or as a general question / response email. The data which needs to be identified includes:

Figure 17: Positive Supplier Declarations

The fields in RED highlight the additional data to be collated, for risk analysis:

• <Sunset Date> - assumed date where a substance is no longer going to be available for use. Informs supplier that there is a potential supply chain risk to them.
• <Mixture> - Supplier to inform whether the substance is part of a mixture.
• <Region Used> - Illicit from supplier which organisation unit and where they are located.
• <Strategy for Replacement> - Illicit from supplier any actions they are undertaking, in the event of none, this poses a potential higher supply chain risk.

Where you need to ask further questions from your supply chain regarding potential supply chain risks, construct a positive declaration form.

Risk Management Plan

Implement a risk management as shown below to look at the potential impacts:

Figure 18: Risk Management Plan

The whole point of performing the material declaration process is to identify known unknowns, and unknown unknowns.

Maintaining Material Declaration Summary

The SlideShare presentation below highlights some best practices when maintaining a material declaration system:

 

11. Customer Declarations 

Substance Reporting

As organisations, we all want to obtain as much relevant data as possible, from our supply chain, to enable us to make informed decisions regarding potential risk.

In reality we are often resist providing the same amount of data as we receive from our supply chain, fear from divulging too much information to our customers and competitors. The SlideShare presentation below, highlights the basic concepts:

Once An Article Always An Article

The recent European Court of Justice (ECJ) ruling on 'Once An Article Always An Article' (O5A) ruling has brought the need to perform enhanced substance reporting, such that article producers, suppliers and importers now need to record data in a much more detailed manner.

The nature and level in which the data should be reported to downstream users remains as a hotly debateable topic, interlaced with need to provide adequate safe use guidance information. There is no universally consistent approach, which will be palatable to everyone within the same industry.

The best that can be achieved is to recognise the need to provide substance data for REACH type reporting, coupled with basic part description data to provide a simple safe use data, this will take clarity in explanation and understanding at trade association level first. 

Conclusions

Apologies for the length of this post, I could of quite easily split this post across several posts. I wanted to ensure the last post in this series of articles was as concise as possible.

In order to truly understand, anticipate and pre-empt supply chain risk from increased chemical substance regulations, a series of actions needs to be undertaken by any organisation:

• Chemical Substance Inventory List - Understand the substances and mixtures you physically have on hand, Ensure you have the latest safety data sheet information, address substances which (a) contain substances of concern; (b) have correct labelling, material handling and safe use information.
• Specifications - Clean up the data so you contain the number of optional substances, If they are needed create new specifications. this is a big bang approach, initially it will cause mass pain and panic within a materials function, however, downstream it makes the task of controlling substance usage and identifying where substances exist within the articles you produce/sell.
• Materials, Design and Engineering - Co-ordinate IT systems, introduce capability such that when new articles are created and users select the specification data, the design systems check the material systems and highlights any areas of concern. This will also make task of cleaning up article to specification data much more cleaner - as you will be verifying specification names at point of design selection.
• Implement Material Declarations - Use this post, there is no uniform answer, step back and think of the issues you have and potential supply chain constraints. Look at the data you need to gather and develop a template, look around at data exchange standards, they may work for. Think about how you will use the data flowing back. Perform a declaration pilot you really need to do this to assess if a declaration template will be accepted by your supply chain.
• Product Stewardship Board - Develop some manner in which substance use within an organisation is managed. The assumption is that some form of product stewardship board will exist to approve new substance usage and manage potential business risk issues.

Material declarations are iterative, they will take time to embed and be accepted by your supply chain. If you work closely with your supply chain, then the chances of acceptance will be higher than simply flowing down a material declaration template request.

Questions

Please share experiences you have had with implementation of material declaration templates / processes / systems.

If any organisation is interested in being interviewed as part of my PhD research project, please feel free to contact me via LinkedIn or via the TICS website. All information will be recorded anonymously, in return I can offer your organisation aid, in the support and design of chemical substance reporting system(s).