Streamlining Product Compliance in view of evolving Aerospace and Defense regulations
In times of macro forces continuously disrupting entire markets and supply chains, A&D companies around the globe find themselves exposed to a multitude of risks – while they are trying to win and retain the trust of their customers and other stakeholders.
Especially companies that must focus on cost-saving measures and mitigate labor shortages are seeking ways to instill more automation and standardization into their core processes, for example by simplifying regulatory reporting and identifying “quick wins” that help today but also pave the way for bigger business benefits that can be realized at a later stage through a comprehensive sustainability business transformation.
One area that many A&D firms see as something where they “just need to get the job done” is managing product compliance in context of various regulatory requirements.
While topics like REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals, EU), TSCA (Toxic Substances Control Act, US) or RoHS (Restriction of Hazardous Substances, EU) are nothing new and exemptions and exclusions are generally applied to govern chemicals and hazardous substance use in Aerospace and Defense products, there is increasing demand to manage product compliance data in a more systematic and streamlined approach – as sustainability mandates and universal expectations towards corporate responsibility foster more restrictive revisions of existing standards and emergence of additional ones, globally and in specific regions.
How do you stay on top of evolving product compliance reporting expectations to fulfill your responsibility as producer? REACH, TSCA, and other regimes dealing with conflict minerals or dangerous goods result in a vast amount of information that need to be collected, analyzed, and reported – the effort to actively monitor all applicable regulations, assess the impact of impending changes to exceptions and exclusions on the complex product designs in this industry is a significant task.
It’s elemental for globally operating A&D companies to keep track of all implications of this dynamic regulatory environment with several compliance frameworks across the globe for their product documentation, supplier management, logistics or long-term aftermarket processes.
One “hot topic” has recently become SCIP. SCIP is the database for information on Substances of Concern In articles as such or in complex objects (Products) established under the Waste Framework Directive by the European Chemicals Agency (ECHA). SCIP aims to ensure that the information about substances of very high concern (SVHCs) on the Candidate List is available for monitoring throughout the whole life cycle of products and materials supporting the transition to the circular economy.
As of January 5, 2021, suppliers offering their products in the EU/EEA market are obliged to submit a notification and information about any article containing SVHCs above a minimal concentration of 0.1% into the SCIP repository. Data can be provided via a website or by using an API, both provided by the ECHA. The list of substances to declare in SCIP is not fix, but subject to regular updates by ECHA.
Fulfilling the SCIP data entry requirements poses some problems for A&D companies, mainly rooted in the rather complex and labor-intensive data collection process, which typically needs to consolidate product information often distributed across multiple heterogenous sources, including unstructured formats (e.g., PDF), and supply chain partners.
In addition, the notion of switching to alternative parts and substitutes in A&D products needs to consider technical design limitations, intricate product safety and performance requirements, sourcing, market, and industry specific compliance considerations, as well as long product lifetimes that need to be supported with inventory over decades. An additional concern, in particular for military products, is to ensure that existing regulations and law, such as ITAR around export control, along with general IP and data protection interests, are not compromised.
Another example that the industry is carefully observing is the next set of proposed revisions to REACH, following the EU Green Deal strategy. A&D suppliers will need to prepare themselves and assess the future setup of their supply chain and product designs. Especially for smaller suppliers, their future competitive position on global scale is a concern considering increasing regulatory pressure and uncertainty and the anticipated need for innovations in product design, materials, and processes.
As product compliance, reliability and safety are non-negotiable in the aviation, space and defense sectors, the prospect of an increasing number of articles that are potentially going to be listed as critical candidates under REACH or other regulations restricting use of chemicals and substances of concern, will lead companies to questions like how to identify and qualify eligible alternative components assuring 100% technical fitness and how to assess the impact on existing inventory – including a potentially growing number of obsolescent parts due to inventory that could be rendered non-compliant – with product models still in service for many years.
Switching to alternate parts is not a straightforward process, it translates into extra effort and cost in design, research, test, and certification – adding to the list of business risks that each supplier already has to address in the current environment.
MRO organizations will evaluate how they can support operations globally considering parts sourced from EU or non-EU, effectively maintain existing fleets and product designs, and stay competitive going forward.
How can digital product compliance solutions help A&D customers in this environment?
A digital, harmonized representation of product master data combining detailed information across manufacturing, global trade, procurement, quality, or finance will drive consistency and a single source of truth that can be accessed in real-time by business users to provide valuable input for any compliance-based decisions, reports or audits.
As one pillar of SAP’s approach to Sustainability, SAP S/4HANA for product compliance helps companies across industries to manage dangerous goods, substance tracking and chemical compositions with the aim to reduce risk and cost associated with meeting these obligations.
It helps to automate and standardize for example:
- Classification of dangerous goods with embedded regulatory content for automatic compliance determination.
- Determination of packaging and transportation requirements, hazard labels, transport permissions.
- Management of documentation requirements, delivery notes, declarations using country and transport mode context.
- Central compliance information management providing different options to exchange compliance data with suppliers to secure the right to market, sell, and ship products.
- Compliance risk monitoring along the product lifecycle based on comprehensive, up-to-date regulatory content for thousands of substances.
- Supplier communication and data collection via multiple channels, for example IPC-1752 declaration
- Multi-level compliance assessments for local and regional regulations across a global supply chain, with support for multiple languages.
- Revision management for legal changes and compliance status re-calculation based on changes to product BoMs, suppliers, or regulations.
- Substance volume tracking and real-time compliance monitoring along the product BoM hierarchy – generation of compliance history reports and other analysis.
You will find more background information in these demonstration videos:
SAP S/4HANA for Product Compliance: Managing REACH and RoHS Regulations
Dangerous Goods classification with SAP S/4HANA for product compliance
A native integration into core ERP processes like logistics, purchasing or sales assures that regulatory context is automatically embedded into these processes, providing a systematic approach to help companies avoiding non-compliant business transactions.
For example, SAP S/4HANA for product compliance as part of the digital core integrates dangerous goods checks and compliance information into logistics processes along the value chain (e.g., automatic block of purchase or sales orders with incompliant materials) and analyzes country specific restrictions dealing with multiple modes of transportation.
SAP’s product compliance solutions can also be extended to automate the data provisioning process into the SCIP database and help A&D companies to meet deadlines and submit all required information under SCIP digitally, in an efficient and consistent manner.
Read more: How does the SAP SCIP interface work?
Overall, a system-based approach that automatically synchronizes and integrates out-of-the-box regulatory content with business processes and real-time product data provides opportunities for significant productivity gains and TCO reduction. Especially smaller and mid-size companies with limited resources can reap benefits, for example by classifying and automatically submitting high volumes of materials to the SCIP database.
Learn how WITTENSTEIN drives compliance data collection with speed and efficiency.
Value realized by other companies:
- Reduced compliance costs by streamlining compliance processes with user experience, analytics, automation, and embedded content
- Increased brand protection and risk mitigation with full business process integration, up-to-date information, and compliance controls throughout the product lifecycle
Such a digital product compliance solution can also become an effective means to extend any digital thread and virtual product representation with additional sustainability context, and therefore further augment the model-based product view in the enterprise system.
As stated before: product compliance, reliability and safety are non-negotiable across A&D – the question is how technology can be harnessed to help organizations to operate more efficiently and effectively in a future state with even more increasing regulatory pressure.
Further reading: SAP S/4HANA for product compliance and SAP Product Compliance for Discrete Manufacturers Solution Brief.