Distributors see smooth RoHS conversion
Staff -- Purchasing, 6/15/2006 2:00:00 AM
Electronics distributors say that the transition to parts that comply with the Restriction of Hazardous Substances (RoHS) directive is proceeding smoothly, despite earlier concern that the European law would create havoc in the supply chain.
On July 1 and thereafter, RoHS bans the use of lead, mercury, chromium and other substances from being used in equipment sold in Europe.
"I am confused. I had expected a much greater frenzy than what we are experiencing," says Craig Conrad, senior vice president, chief marketing and strategic planning for TTI in Fort Worth, Texas. "I thought there would be more panic and more volatility. But there isn't."
Many in distribution thought RoHs would create chaos in the supply chain. For one thing, there was no guidance issued by the European Union until late May on what companies would have to do to show compliance (See story, p. 48.). In addition, many component manufacturers said they would not issue new part numbers for RoHS-compliant parts. Many suppliers said they will continue to make noncompliant parts in addition to compliant components.
All this seemed to be a recipe for disaster. However, weeks before RoHS deadlines, most large OEMs have made the switch to RoHS parts. They say they are confident that they have the necessary documentation to show RoHS compliance if their products are called into question.
Many smaller companies have also made the transition although some are lagging. Some small companies aren't concerned about RoHS because they either don't sell to Europe or make equipment that is exempt from RoHS.
While there has not been chaos, RoHS has proven to be costly for distributors. Many of them had to redesign systems to improve the quality of data and to accommodate the new RoHS parts. They had to make changes to their warehouses and work more closely with customers on RoHS issues.
"RoHS has impacted the information systems and the inventories of distributors," says Roy Vallee, CEO of Avnet, located in Phoenix. "Many of the new compliant products have new part numbers. For compliant products that don't have new manufacturer part numbers, distributors have to track the dates or lot codes that identify the parts as being compliant," he says.
In addition, distributors have had to assist customers with RoHS. "Many customers look at us as their primary source of supply," says Vallee. "We want to be able to take their existing bills of materials and help them identify which parts are noncompliant, what are acceptable substitutes. It has been a big deal."
However, RoHS has also been an opportunity for distributors as well. "We decided RoHS can't just be a cost to our business," says Paul Tallentire, president of catalog distributor Newark InOne in Chicago. "We've used it as a platform to help customers and grow our business. Newark InOne offered customers various free services such as RoHS bill of material scrubbing and e-mail notification when non-RoHS parts became obsolete because they transitioned to compliance or if the parts were just phased out by the part maker."
Distributors will continue to carry compliant and noncompliant parts. While many manufacturers have phased out noncompliant parts, others have not. Some manufacturers say they will continue to make both versions because they have customers in industries that are exempt from RoHS such as communications, medical and defense. Some manufacturers say they have no immediate plans to phase out noncompliant products. That means distributors will have to carry both kinds of parts indefinitely.
"If they want compliant parts, we will sell them. If they want noncompliant parts we'll sell those," says Mark Larson, president of distributor Digi-Key in Thief River Falls, Minn.
However, Larson says prices may increase for noncompliant products. "Maybe down the road as noncompliant parts become less available there will be supply problems and there will be a premium price for them," he says.
Other distributors see tighter supply and higher prices for noncompliant products as well.
"We are seeing the beginning stages of that," says Conrad. "We have heard 40-50% price increases being talked about for leaded product."
He says that higher prices will motivate those companies that have not transitioned to RoHS-compliant products to do so. A survey TTI did late last year showed that 50% of TTI customers had no plans to transition to compliant parts because they were exempt or did not sell in Europe.
Other distributors also say a lot of companies have been slow to transition to RoHS compliant products.
"We have been surprised that customers haven't come along as quickly as we thought," says Steve Ferry, vice president of supplier marketing for Melville, N.Y.'s Arrow Electronics' components group.
A large portion of Arrow's customer base has or believes it has waivers from RoHS because they are in the medical or defense industries.
Vallee says though many electronics companies may be exempt from RoHS, they will still be affected by the law because they will increasingly find it difficult to find noncompliant parts.
Now Playing: 