On June 21, 2018, the ECHA added Lead to the Candidate List for Substances of Very High Concern under REACH.

Not banned in every application…

While this regulation arguably covers only manufacturers and importers in the EU, the fact of the matter is that  our shops here in North America are producing components (articles) which are incorporated into products in the EU.
Our customers, who specify the use of leaded materials because of the economics of product provision (Leaded materials machine at much higher efficiency rates, lower costs , and seldom need post fabrication operations) are now asking their suppliers for a statement of compliance for the materials that THEY specify us to make THEIR components from. Leaded Steels, Brasses and Aluminums.
Our shops find themselves placed right in the center of a paradox-  how can they certify that the material that their customer told them to use is compliant with this new REACH development?
PMPA has analyzed this and provided our members with a guidance document that

  • Recites the applicable facts and regulatory obligations
  • Describes where and where not the REACH and other EU regulations apply / might not aply;
  • Analyzes the duties to our customers
  • Describes ways to meet our obligations
  • Provides references for understanding this new development

The world of Precision Machining is characterized by Volatility (this regulation just Arrived), Uncertainty (does this apply to me, I’m an North American, not European manufacturer?) Complexity ( So I need to read the ECHA announcement, The ECHA Substance Support Document, the Annex that covers Lead,  and then two more annexes that tell me what I need to do) before I can figure out what I need to do, and Ambiguity (Actually the annexes do not expressly state what the exact deliverable  required is).
This VUCA world is made manageable by  PMPA regulatory sensemaking  to help our shops  first recognize, then intelligently understand and manage their risk.

  • Who is helping you and your team recognize new regulatory risks?
  • Who is helping you to understand those risks?
  • Who is providing answers so that you can concentrate on making those critical parts that the world needs, instead of spending three or four man-Days trying to figure it out? (Presuming that you know the issue even exists!)

PMPA members know who.
PMPA Members Only Guidance Document

First you have to recognize it.

It is difficult to intelligently manage risk if you don’t even know how to measure that risk. What are the units?

The media talks today about “tapering” as if it is going to be news. Yet they fail to report the actual reality of the market consequences of the Fed’s Asset purchases.

First, a graph of the Fed Balance Sheet:

fed balance sheet

One result of this is a Volatility beyond our awareness.

Last week,  the yield on the 10-year Treasury hit 2.855%.

On April 26, the yield was 1.64%.

That is an astounding 74% increase. In Treasury yields.


For perspective, if the Dow had gained as much over the same time frame- it would now be  in the  25,551 neighborhood!

The media is missing the story.

We have unprecedented volatility in our financial system today.

So how do we see it as manufacturers?

DGORDER_July 2013

The Commerce Department said on Monday (July) durable goods orders dropped 7.3 percent as demand for goods ranging from aircraft to computers and defense equipment fell. That was the biggest decline since last August and snapped three consecutive months of gains.”- Reuters

Contrast that to the gushing ISM report for July from the Economic Populist blog: “The July ISM Manufacturing Survey shows PMI had a blow out increase of 4.5 percentage points to 55.4%.   Manufacturing has moved into sold growth with new orders increasing by 6.4 percentage points and production roaring in an 11.6 percentage point gain.   Even the employment index increased.”

These are Volatile, Uncertain, Complex and Ambiguous times. We need to look for the story behind the story behind the story.

I am reminded of a classic Richard Pryor/Groucho Marx line  “Are you gonna believe me or your lyin’ eyes!?”

When it comes to economic indicators, It is in our best interest to try to recognize and challenge the underlying assumptions.

How do you intelligently manage risk in the current economy?

Volatility. Uncertainty. Complexity. Ambiguity. Welcome, to the year 2012!

The headlines are filled with factors that make our planning for the year ahead futile at best. Eurozone Sovereign Debt. China Currency. U.S. Economic Problems. High Unemployment.

With all of these issues potentially ready to emerge at any second, what can we do to intelligently manage our risk?

Here are 5 ideas to thrive in the face of today’s uncertain market environment:

1) Edit your customer list. In the old days, adding customers was the thing to do. But noone ever made up for low margins with volume.Edit your customer list to those customers that provide you with a return at or above your cost of capital. Just like we add value by taking stock removal from barstock, removing the customers who cost you more than they contribute will free up limited resources so that you can better serve the customers who do cover your costs. (Note: this will really pay dividends for you with your banker, who is no longer lending on B.S.)

2) Work your supply chain- in both directions. Communication and cooperation are critical to success when facing uncertainty. You just might find that your communications is what is keeping your part of the turned products market thriving. Communicate, communicate, communicate.

3) Manage your inventory and dollar cost average in high variability times.There is no doubt that the year 2012 will be one of high variability. Rather than making a few outsize buys of raw materials, placing smaller regular purchases will enable you to dollar cost average as the market does its roller coaster thing based on whatever news story is hot that day. You can’t sell parts this week if raw material is 4 month lead time. You know what you typically use. Intelligently manage risk, have material on hand to make parts, and then you won’t have to listen so carefully to the news.

4) Producing low value added in a high cost location is a losing business strategy. Your peers have been leaning, innovating, and reducing their costs to remain competitive. In addition to editing your customers, you need to edit those low value added jobs out of your business plan. Editing adds value.

5) Improve cross functional communications between your team and your customers’. This is a great year to take your people to meet your  their customers and counterparts and to exchange ideas on ways to improve performance and reduce costs and waste all the way around. While this might be seen as a corollary of idea number 2, the fact is that taking your people to customers is a great idea for continuous improvement anytime.

We have no idea when any of the crises we know of will blow up. We have no idea when the sword might fall. But inspite of increased volatility, uncertainty, complexity and ambiguity, we can improve our chances for success by taking the steps outlined above.

What do you think is the most likely issue to emerge in 2012 that we have not listed above which will affect your business?

Sword of Damocles