As the world grapples with the immense impact of the disaster in Japan, attention is turning to the global economic impact of the country’s lost production. Japan has long been a critical link in the supply chain of many industries – perhaps most notably in the automotive and electronics sectors.
The Financial Times ran a piece today on this which touches on contingency plans to help replace lost production stemming from unforeseen major disruptive events.
In this context, a question arises: Will companies enforce their procurement requirements for vendor EHS performance during this period?
Elm has long discussed EHS risks in the context of supply chain disruption contingency planning. In past years, the risks have been more focused on matters related to how production redistribution could cause violations of various environmental permit limits tied to production levels. However, the rise of ethical purchasing standards – as voluntary and highly publicized corporate commitments – has altered the definition of EHS risks in supply chains.
It may be months or years before some of the Japanese plants are in production mode again. In the interim, companies impacted by the disruption face a conundrum:
- Do they attempt a rapid production recovery by quickly engaging second-tier alternative suppliers that may not meet EHS procurement standards (i.e., relaxing their supplier requirements)?
- Or do they stick to the EHS standards for suppliers, thereby risking potentially extended production downtime while either (a) searching for a supplier who meets the standards, or (b) bringing a supplier up to speed?
Certainly, it is easy to say there is a third option – implementing an existing contingency plan with an existing alternate supplier that already meets the EHS procurement standards.
But few manufacturers have that third option available, as EHS concerns tend to be overlooked in supply chain disruption planning.
MetalMiner.com, one of the world’s foremost on-line publications on global procurement of metals and related products, including global pricing trends, capacity constraints, supply market M&A activity, is publishing a series of articles written by Elm on Conflict Minerals. MetalMiner.com was founded more than four years ago and since then has become a recognized leader in providing unique insight, analysis, and tools for buyers, purchasing professionals, and everyone else for whom metals and their related markets matter.
Part 1 of Elm’s series is here. The series will continue through this week.
Unlike other articles on the subject, MetalMiner’s series is focused on the SEC’s proposed Conflict Minerals regulations in the context of pragmatic aspects of conducting the required independent third party audits.
EPA is using non-traditional methods for locating violations.
On October 2, EPA announced a PCB enforcement case stemming from an eBay auction. EPA investigators found Railside LLC, a factory surplus liquidator, offering to sell an unmarked General Electric Pyranol capacitor on eBay. EPA then inspected the seller’s warehouse, and alleged that Railside violated PCB regulations by failing to mark its capacitor with a label identifying it as containing PCBs as prescribed by federal law. Railside responded quickly and cooperated with EPA; the Agency settled for a penalty of $250 and an enforceable agreement to properly dispose of the PCB-containing equipment. This disposal cost the seller $1,200. It should be noted that eBay was not a party to this enforcement action and did not violate any environmental regulations in this case.
While the actual enforcement costs are low in this case, it does highlight EPA’s success at using new ways of finding violations. Companies using web-based asset management methods should ensure that those activities do not escape EHS review.