Brad Heath caught a glimpse of the future in 2003 when the European Union adopted the Restriction of Hazardous Substances Directive (RoHS). Instead of shying away from the unknown, CEO Heath realized that RoHS, which restricts the use of certain hazardous substances in the manufacture of electronic and electrical equipment, signaled a new direction in the industry. Heath and his company, VirTex Assembly Services, Inc., embraced the resulting lead-free movement and began producing RoHS-compliant products, including printed circuit boards and end product enclosures for advanced industrial print equipment, semiconductor test equipment, level sensing and remote monitoring, and robotics.
Since then, his small electronics contract manufacturing company has led the way in its industry as a role model for environmentally friendly manufacturers.
When the RoHS guidelines were released, "nobody had a clue what the impact would be or what they needed to do," Heath says. RoHS, often referred to as the lead-free directive, restricts the use of six substances in the manufacture of various types of electronic and electrical equipment. The directive, adopted in 2003 by the European Union, officially took effect on July 1, 2006. The directive is often coupled with the EU's Waste Electrical and Electronic Equipment Directive (WEEE), which sets collection, recycling, and recovery targets for electrical goods and is part of a legislative initiative to deal with toxic waste products. RoHS-type regulations have since taken effect in other parts of the world, including China and California, where the SB 20: Electronic Waste Recycling Act (EWRA) began prohibiting the sale of certain electronic devices as of Jan. 1, 2007.
VirTex, whose core competencies are materials procurement and electronic products assembly, took the lead in the lead-free movement on behalf of its customers and its network of partners — including designers, printed circuit board fabricators, cable and wire harness suppliers, metals and plastics fabricators, and component suppliers — by gathering information on when the new regulations would go into effect, who would be affected, and what the rules meant to its corner of the electronics industry. The company also explored what financial impact compliance might have and the possible effects of noncompliance.
VirTex's leadership role, embodied in its Green Manufacturing Initiative, earned it the High Achiever award for Leadership Mastery in Managing Automation's 2007 Progressive Manufacturing awards competition.
Regulatory compliance is now a part of daily life for manufacturers in many industries, with regard to manufacturing processes, financial reporting (Sarbanes-Oxley), and operational and product development record-keeping (FDA 21 CFR Part 11), just to name a few. Today, literature and Web sites abound with information, and software vendors have even begun offering products specifically designed to aid companies in managing their compliance efforts. But it wasn't always that way.
In 2003, there wasn't a lot of published information on RoHS available, so VirTex reached out to contacts in industry groups such as the IPC-Association Connecting Electronics Industries (previously known as the Institute of Interconnecting and Packaging Electronic Circuits) and IMAPS (International Microelectronics and Packaging Society), and then held a regional symposium to educate its customers and partners. The reviews were positive and demand for information was high; the one-off half-day symposium soon became a road show.
Turning Green
Becoming a "green" manufacturer involves more than a simple, one-time commitment to becoming environmentally friendly. It requires organizational changes, equipment upgrades, and process changes. To help manage the Green Manufacturing Initiative, the company used the Parts Universe Materials Analysis (PUMA) software database available through Promiere/Avnet Electronics. PUMA, which comprises a collaborative database that collects information from component manufacturers, provided a single source of data for about 80% of the more than 15,000 parts VirTex needed to research for the project.
"PUMA was used to allow us to quickly determine whether parts were RoHS-compliant by exporting data from our component database and uploading it to the PUMA system," Heath explains. The results were then automatically sorted into compliant, non-compliant, or undetermined categories. Those labeled "undetermined" were then researched manually or investigated directly with the manufacturer.
Working with lead-free components also meant changes in reflow processes, new profiles, and the recharacterization of operational inspection criteria, which in some cases VirTex had to perform on-the-fly, without much guidance from the industry groups, Heath says. "It was kind of like starting over, but at full speed," he says, as VirTex strove to perform internal testing and process adjustments without impacting customers.
VirTex has seen its revenue increase as a result of the Green Manufacturing Initiative, but positive profit margins have yet to follow.
"[Eliminating lead] is not cheaper," Heath says, because the tin-silver-copper materials that VirTex now uses are more expensive than the traditional tin-lead combination. Heath estimates a 30% to 40% increase in materials cost. The company has also experienced an increase in electrical, screening, and rework costs.
Meanwhile, new customers recognize that Virtex is on the leading edge of the lead-free movement and have opted to use its services. And existing customers have moved a bigger percentage of business over to VirTex for the same reasons, Heath says. A network of satisfied customers and suppliers has helped spread the word that VirTex is operating lead-free.
The company's cache of about 50 active customers is up about 20% from last year and 30% from 2005. Today, 70% of customers that have been required to comply with RoHS are now successfully meeting the requirements, Heath says. The remaining 30% are either partially compliant or haven't yet needed to eliminate lead from their products. VirTex is aiming for a complete transition to lead-free equipment and materials by December 2007.