Europe is widely reported to have the world’s strictest environmental regulations, which places a significant administrative and financial burden on manufacturers that do business there. For years, the Japanese consumer electronics giant Panasonic has used manufacturing sustainability software from SAP to oversee a mandatory recycling system that has presented its share of data management and integration challenges.
Panasonic Europe Ltd. uses SAP’s Recycling Administration (REA) module for detailed regulatory reporting and accounting on 50,000 products in 18 European countries. While the savings from automation and centralized data management have been significant, better integration with suppliers and other SAP modules in the company’s ECC 6.0 system could make REA a platform for managing environmental sustainability throughout a product’s lifecycle, the company said.
Getting there won’t be easy, according to Thomas Knopp, environmental project manager for Panasonic Europe, headquartered in Bracknell, U.K. and Wiesbaden, Germany.
“Our factories are not connected to SAP,” Knopp said. He described a manual process that involves emailing Microsoft Excel spreadsheets that contain information on packaging, batteries and other regulated materials to a central location, where someone cuts and pastes the data into REA.
The situation was much more dire in 2002, when Knopp rolled out SAP REA to the first country, France. That year, the European Union passed the Waste Electrical and Electronic Equipment (WEEE) Directive, obligating manufacturers to implement take-back programs by contracting with organizations called “schemes” that accept consumers’ equipment and ship it to recyclers.
“We have one EU directive, but there are 27 European countries which have multiple local requirements,” Knopp said. “It’s really complicated.”
Manufacturers are required to fund e-waste recycling based on a market share that is calculated according to the weight of products sold.
“Let’s say we have 30% of the TV [market]. We are obliged to take back 30% of the WEEE waste generated,” Knopp said, including other manufacturers' products.
Before implementing REA, the company couldn't easily break out the net weight of the components in a regulated product. Other items that ship with a TV -- for example, the stand, remote control and manuals -- got added incorrectly.
Knopp estimates that REA has allowed the company to cut recycling costs by 15% and avoid paying fines by documenting all of its activities. “It’s very, very easy to use,” and requires only an hour and a half of training, he said.
REA has also helped cut administrative costs, according to Knopp. One full-time worker oversees recycling compliance management, including staying on top of local legislation. Another full-timer handles REA software projects, while a third handles data management. Each country has a half-time worker who runs the REA declarations and provides the data to local schemes.
However, an REA implementation requires significant work in the background. Reflecting on his nine-year experience with REA, Knopp said the data management and project management work involved was a surprise.
“We simply underestimated the complexity,” he said.
Knopp says he also learned the risks of delegating local data management. Some people mistakenly deleted data arriving from other countries.
“The data quality was really, really bad,” Knopp said. “That’s why we have implemented central data management here for all of Europe.”
According to Jennifer Scholze, SAP’s senior director for sustainability solutions, product safety, and stewardship, most manufacturers can set up the typical country’s REA system in as little as two weeks or “two and a half months, tops” if the country is large, like Germany, and has numerous recycling schemes and partners. “Once they do one country, it’s a little more cookie-cutter,” she said.
SAP integration challenges and opportunities
Europe is the hotbed of environmental regulations, with 150 companies using SAP REA, Scholze said, but other regions could soon follow.
“The North American guys are waking up -- there’s a lot more regulations coming along,” she said, and retailers including Wal-Mart have begun evaluating suppliers according to scorecards for sustainable packaging.
Knopp says Panasonic, which continues to roll out REA to countries in Europe, also plans to use it for e-waste recycling administration in the U.S. and Asia. Integration within the SAP suite and to third-party applications has improved significantly over the years and will play a role in how Panasonic deploys the system globally.
“The great advantage of REA is the seamless SAP integration" to other ECC modules, including Material Master (MM), Finance and Control (FICO), and Sales and Distribution (SD), he said. Underneath, an Oracle database runs on the IBM AIX operating system and IBM hardware. Knopp said the company also uses SAP Business Warehouse for reporting.
REA swaps model information and net weight data with MM, while SD manages the condition types (variables that affect prices). The pricing, quantities sold, and weights must go on the “declarations” sent to each country’s recycling schemes—50 schemes in all, according to Knopp.
Panasonic pays the scheme’s shipping and recycling costs and receives invoices back.
“They deal with everything that is related to take-back and recycling,” Knopp said. “We at Panasonic do nothing. We simply provide declarations to schemes.”
But he is candid about where the integration is lacking, especially the inefficient spreadsheet system. Some of Panasonic’s manufacturing divisions and supply partners use product information systems that Knopp hopes someday to integrate with REA so WEEE data can be transferred directly.
The company also wants to install SAP Enhancement Packages next year, including those that allow it to integrate Business Warehouse with ECC. “The problem is that when we implement new enhancement packages here in Europe, it’s a lot of work,” Knopp said. “It’s time-consuming and a little bit expensive. I think that’s why we have their older release.”