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The cost of compliance

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Get ready to hear phrases like “RoHS-releated expenses” tossed about on quarterly calls. The costs of complying with the 1 July 2006 deadline to produce lead-free products comes with more than paper-pushing charges in a company’s financials and could have greater impact than expected at first glance.

The obvious cost is material—moving from lead to another alloy in producing product—but what might be less obvious is the second round of production runs these lead-free products cause.

“We are taking every single one of our products and converting it to RoHS/lead-free compliant version. What makes it difficult is the process we have to go through. We have a standard version and then we have to make a compliant version,” Rick Mintle, North American sales and marketing manager for EM Microelectronic, an electronic systems company of the Swatch Group, says, not wanting to leave out customers who are still working with lead.

“What we have to do is build some of those compliant versions, then notify the customer that this is available, then sample the customer, then they qualify it, then we switch over their orders to the complaint version. That’s a pretty detailed process.”

Distributor Newark InOne (Farnell InOne is Australia) is following the same route and feeling the same pinch. “Those are some of the areas you start getting into from a monetary or cost standpoint because we are keeping two inventories,” says Jeff Shafer, Newark InOne’s senior VP of product management, noting that on top of that the company does bin checks to be absolutely certain customer orders for lead-free are lead-free.

In its case, Newark InOne has added additional employees—at additional cost—for the bin checks, as well as additional employees in the receiving area to double check warehouse supply. Shafer also noted additional time and money spent by Newark InOne’s legal staff, for undertakings such as ensuring the verbiage is correct on packaging and sorting out new contracts. (More at ferret.com.au/electronics.)

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