Component obsolescence frustrates many an engineer, supply chain manager, and tech executive. The phenomenon leaves manufacturers and distributors alike in precarious situations.
As technology advances, players in the tech industry must adapt to changing trends. This also goes without saying for consumers, who freely purchase and enjoy the latest tech innovations on the marketplace, but for manufacturers, these changing trends can cause serious headaches.
What is component obsolescence?
Component obsolescence is when a machine part’s product lifecycle exceeds its maturity. A phasic decline, phase-out, and ultimate unavailability of the product ensues. Obsolescence can cause friction in supply chains, incur price increases, and bring about product delays.
As early as the 1980s, OCMs (Original Component Manufacturers) held an industry standard to send End-of-Life notices to their customers, to try and offset the harm that unexpected obsolescence can cause customers.
Obsolescence only accelerated over the decades, and today’s tech landscape poses some of the most significant challenges yet to answer this problem.
Obsolescence: Why it’s worse today
The advent of IoT, AR, and automated tech spells out new manufacturing needs for semiconductor companies, according to Chris Gerrish, President of Rochester Electronics, in an interview with Sigenics.com.
“As new semiconductor products increase in demand, the manufacturing volume increases, and older products are phased out. This is the semiconductor lifecycle.”
The issue doesn’t affect the military so much as the private industry because the military requires 10-15 years of support. Buyers with tight budgets, who can’t necessarily afford their End-of-Life stockpiling requirements, are particularly affected.
The problem extends into industries old, new, and emerging. Product life cycles on the latest tech have broadened, but the demand for advanced components has also become more specialized. Meanwhile, manufacturers of less advanced technologies generally keep low part inventories and often produce in high volume. OCMs are torn between the two forces as the money in advanced technology grows, and their competitors consolidate their businesses for scale efficiency.
Getting everyone on-board to address obsolescence
Across tech, not everyone is in alignment on the issue of obsolescence.
An Electronic Design and Source Today study found some executives to be less concerned about obsolescence and consolidation than their engineers and supply chain managers.
“While 77 percent of both engineering and procurement professionals say that the threat of obsolescence is at least somewhat important to their supply chain, only 62 percent of executives agreed. Only 46 percent of executives flagged consolidation as a hazard, as opposed to 55 percent of engineering and 57 percent of procurement staffs.”
The issue of obsolescence and related consolidation remains very real. Executives, as essential thought leaders in an organization, would do well to equip their engineers and supply chain managers with the time and resources they need to address component obsolescence.
Forecasting to address component obsolescence
Forecasting is critical for buyers to stay on top of component obsolescence issues. Just how to forecast can be broken down into a continuous, short-term process, coupled with a forward-thinking, long-term process.
Short-term forecasting may identify reduction in the sources of the component, price increases, and reductions in inventory; the things your proactive supply chain manager might already be keeping track of. Naturally, announcements from part manufacturers may also indicate these changes, and should also be a part of short-term forecasting models.
In the long term, data mining the periods prior for any precursors to the short-term indicators – be they time windows, manufacturer announcements, or even weather patterns – can informatically anticipate when and where the next component obsolescence may be.
Academics are still investigating just what the right model for forecasting might be. It is generally recognized in both academia and among industry practitioners that the nature of obsolescence varies to any specific component’s specifications.
As a strategy, employing long-term technique while identifying precursors in the short-term can help to get ahead of obsolescence before it happens. The process is self-improving: Proprietary data should render successive iterations of obsolescence forecasting more accurate over time. Done correctly, it a process that requires initial faith and should render future (if not immediate) payouts.
Lifecycle support clauses and re-engineering to address obsolescence
Manufacturers with the right amount of clout have the option to negotiate product lifecycle support clauses into their procurement contracts for components. While most industry contracts contain some provision for technical support or warranty, expressly requiring lifecycle support like in military contracts can provide a nonmilitary buyer contractual insurance against obsolescence.
An alternative and most popular option is to re-engineer to address obsolescence. In situations where a viable substitute exists to overcome a part’s high price or unavailability, changing the parts needed can avoid the issue altogether. Designing new products with lifecycle support in mind is also helpful as a preventative measure.
Similarly, using components from a manufacturer dealing in military contracts could theoretically improve the supplier’s lifecycle support of a part, because of that part’s required support from government buyers. The mil-spec component won’t itself be available for purchase, but the close variant allowed to nonmilitary buyers may still be in production because of the mil-spec’s support requirements. This is likely only viable in limited circumstances.
Outsourcing is always a reliable option, in addition to the above, but isn’t always best for cost savings. Looking into what outsourcers have to offer is still worth a shot.
What do you think?
How do you think companies should address component obsolescence? What additional insights could you contribute to help industry experts forecast and/or address the inevitability of obsolescence?