Does your ERP system do Substance Volume Tracking?

Wednesday, 13 December 2016

Businesses importing chemicals into the EU are required under the REACH Regulation to capture tonnages down to component level and also when exporting to other regulatory regimes that require substance tonnage capture e.g. Korea and Turkey, an activity known as Substance Volume Tracking or SVT.

Many businesses activities revolve around their ERP system, which stands for Enterprise Resource Planning. An ERP system helps companies integrate and manage all their financial, supply chain, manufacturing, operations, reporting and human resources activity but few cope adequately, if at all, with SVT as they were never intended to act as an inventory of things down to component substance level. Compare an ERP Bill of Materials (BoM) to a Bill of Substances (BoS) from which substance volume tracking data is derived, the essence of what REACH and other regulatory regimes now require.

This evolution from inventory management to substance management and substance volume tracking is a new area for lots of importer companies, especially downstream users in discrete manufacturing, finished goods distribution and retail who wouldn’t normally have classed themselves as being chemical companies and hence don’t have ERP systems with Bills of Substance capabilities. But now classed as chemical handling companies, many are finding it painful and simple things like resources being purchased in units that are sensible in manufacturing terms - in litres or metres or gallons or packs or any number of units - is a major issue where regulations like REACH require reporting to be in tonnes alone. Trying to use an ERP system for regulatory purposes necessitates some kind of translation between units – and that’s the starting point for many.

Where Full Material Disclosure (FMD) by suppliers of complex mixtures and articles would be the ideal – and it’s where we’re heading – this isn’t a practical proposition for many supply scenarios at the moment, and certainly not for businesses lacking the “pull factor” of some major industrial supply chains such as electrical goods and automotive industries, where FMD becomes mandatory. In other words, in order to be part of their supply chains, full material disclosure is required, but if you’re the little guy demanding the same from your suppliers, then there could be considerable push back over issues such as Confidential Business Information (CBI) covering your suppliers’ suppliers, formulation Intellectual Property and more.

But we are some way off FMD for the majority of businesses so it pays to take steps now to demonstrate compliance and proactively manage the situation with the information that you CAN get. At the end of the day, diligently working through a plan to collect supplier materials information where you can is certainly better than having EU Member States competent authorities finding on inspection no system and no plan, which may result in fines and reputational damage.

Much of it is grunt-work, collecting information from suppliers and interpreting what they send you doesn’t lend itself nicely to automation. It requires an intelligent knowledge of your products and an understanding that your supplier may not be as up-to-speed on regulatory requirements as you are, a situation we all hope will improve over time as regulatory regimes mature and good-practice and experience is gained and shared.

Whether companies use a piece of paper and a calculator, a spreadsheet, or a dedicated software tool such as Baytouch’s ProductTraq to monitor the volumes of chemicals they are importing/exporting, the approach to SVT will be the same:

1. A supplier and all-products download from your ERP system including quantities in whatever unit your system uses
2. Collect component and source materials information from your suppliers
3. Identify articles (under REACH)
4. Put in appropriate conversion factors from litres, discrete units, etc. to convert to kilograms/metric tonnes
5. Identify formulations, identify components, or the whole product if covered by an OR agreement.

Then you are in a position to create and run relevant and meaningful SVT reports:

• How much product is imported to the EU broken down to component substance level, excluding OR and/or exempted substances
• Be alerted to and report on substances nearing their threshold tonnage level, and potentially conduct “what-if” scenarios to project future imports or onward sales that might breach threshold volumes and incur higher tonnage band registration costs
• How much product is shipped from a given Legal Entity to Korea or Turkey, as examples, broken down to component substance level

There will likely be data quality issues when using data intended for one purpose (ERP) for another (SVT), but no one ever said doing SVT was going to be easy or quick, but it has to be done and here’s the start.

More details can be found on the "">ProductTraq website or feel free to contact us for more information on how ProductTraq can be the foundation of your SVT tracking or to request web demo or free trial click here