The Google-Motorola deal announced last week is about hardware manufacturing capability. In other words, Google just paid $12.5 billion for a gadget supply chain with over 20,000 patents as the cherry on top.
As Chris Nowak put it in a recent article in Environmental Leader about quality management in a modern supply chain, “Today’s business problems include how to compete with a supply chain like Apple’s – a bristling hot pot of electronics suppliers and logistical hubs that delivers a customized, monogrammed electronic gadget in 3 days or a book you order today that’s delivered tomorrow, or the sneakers that you design to wear next week.
“Like it or not,” writes Nowak, “this is today’s competitive field. All this speed still has to be cost-effective, innovative, compliant and risk-analyzed for whatever market it’s being made in and sold into. Today’s global supply chain has blink-fast distribution demands.”
It couldn’t be more true. What Motorola has is a hardware supply chain for gadgets comparable to Apple’s; now Google has one too. That’s a large chunk of the $12 billion, and that chunk that was worth it.
The environmental compliance piece. What’s notable from our point of view is that Motorola has in recent years made significant efforts in its supply chain environmental compliance. Their supply chain risk in terms of compliance vulnerabilities is low, low, low.
Motorola has for years been actively collecting supplier chemical information, fortifying compliance efforts with REACH, RoHS and other environmental regulations — imposed by both government and industry alike.
Did Google see that as part of the value?
Did Google acquisition executives see this material disclosure data as significant portfolio gold that may continue to return value?
As regulations tighten worldwide and the pressure mounts to know what’s happening at the chemical level in an electronics (or in any discrete manufacturing) supply chain, Google will know. Their competitors? Not so much..
Microsoft, Apple and Oracle have a new and sudden weak spot. While the term material disclosure has more than one meaning, some call it “supply chain insurance.” Here’s how Motorola — in just a few years — has insured its supply chain.
“We require our suppliers to disclose an extensive list of Motorola Solutions’ banned, controlled and reportable substances as well as request recycled material content for each part supplied to Motorola Solutions,” says the company. “We do this to fully understand and track the material content of our products, to comply with regulations, prepare for future regulations and control and improve the environmental profile of our products.”
This is not a partial approach. It’s bold and thorough.
If you think about all the law suits that fire back and forth between the tech giants like Google, Apple, Microsoft and Oracle — the giants without material disclosure insurance seem suddenly keenly vulnerable in the environmental, sourcing, and quality assurance heel.
Motorola’s material disclosure advantage. Motorola Solutions — in its corporate documentation — discusses how its taken a proactive approach and compiled a list of 63 substances (or substance groups) targeted for exclusion, reduction or reporting during the design and manufacture of products. The list is divided into three sections:
- Banned substances which are not allowed for use in any Motorola Solutions product at any level
- Controlled substances which are limited for use in manufacturing processes or certain product applications (use limitations are typically defined by national or international environmental regulations)
- Reportable substances which are are not currently banned or controlled for use, but are likely to be in the future or the company has identified the need to understand their use as part of a environmentally conscious design process and/or for end-of-life management
Motorola has for years now required its suppliers to fully disclose information on the materials composition of parts and components, including information on substances of concern and recycled material content. The company collects, stores and published information about internal efforts in researching alternative materials and stewardship regarding batteries and other end-of-life concerns.
Regulatory specifics. Motorola has been a leader in recognizing that many countries around the world have implemented regulatory restrictions on hazardous substances.
- European Union’s directive on the restriction of hazardous substances (RoHS): Motorola Solutions complies with the European Union’s directive on the restriction of hazardous substances (RoHS) for electronic products sold in the EU. The company voluntarily extended compliance with the European Union’s restriction of the hazardous substances (RoHS) directive to cover all newly designed professional and public safety two-way radio products as well as mobile and wireless products for the enterprise, regardless of where they are sold worldwide.
- China Management Methods: China’s Management Methods for Controlling Pollution from Electronic Information Products requires manufacturers to report and label usage of the same six hazardous substances listed in the EU RoHS Directive affective as of March 1, 2007. All Motorola, Inc. and Solutions products manufactured after March 1, 2007 and shipped into China comply with the labeling requirements of China Management Methods. Motorola posts a direct phone line where you can call to get more information.
- REACH: REACH, the European Union substances regulation that entered into the force of law on June 1, 2007, has notable phased deadlines to 2018. The broad regulation requires communication throughout the supply chain, and Motorola Solutions has been “actively sharing information to meet our obligations and help our customers meet theirs.”
The Wily Larry Page. Acquiring Motorola Mobility’s environmental compliance and collection of material disclosure information from suppliers may not be the final straw that flips the other turtles onto their backs. But it may. In the meantime, the value of the logistical aspects of Motorola Mobility’s logsitical supply chain is not to be overlooked.
Not everything Larry Page, Inc., also known as Google, has done in 2011 has been amazing, but this deal is a smart, wily, forward-thinking acquisition for a number of reasons — from risk management right down to the chemical level.