Strategies to the Prediction, Mitigation and Management of Product Obsolescence

Bjoern Bartels, Ulrich Ermel, Peter Sandborn, Michael G. Pecht

• Publisher: Wiley
• Year: 2012
• Print ISBN: 9781118140642
• eBook ISBN: 9781118275467
• Edition: 1
• Topic: Technology & Engineering
• Subtopic: Electrical Engineering & Telecommunications
• Index: Technology & Engineering

Supply chains for electronic products are primarily driven by consumer electronics. Every year new mobile phones, computers and gaming consoles are introduced, driving the continued applicability of Moore's law. The semiconductor manufacturing industry is highly dynamic and releases new, better and cheaper products day by day. But what happens to long-field life products like airplanes or ships, which need the same components for decades? How do electronic and also non-electronic systems that need to be manufactured and supported of decades manage to continue operation using parts that were available for a few years at most? This book attempts to answer these questions.

This is the only book on the market that coversobsolescence forecasting methodologies, includingforecasting tactics for hardware and software that enable cost-effective proactive product life-cycle management. This book describes how to implement a comprehensive obsolescence management system within diverse companies. Strategies to the Prediction, Mitigation and Management of Product Obsolescence is a must-have work for all professionals in product/project management, sustainment engineering and purchasing.

Chapter 1

Introduction to Obsolescence Problems

Obsolescence is the status given to a part when it is no longer available from its original manufacturer. The original manufacturer’s discontinuance of a part may have many causes, including nonavailability of the materials needed to manufacture the part, decreased demand for the part, duplication of product lines when companies merge, or liability concerns. The problem of obsolescence is most prevalent for electronics technology, wherein the procurement lifetimes for microelectronic parts are often significantly shorter than the manufacturing and support life cycles for the products that use the parts. However, obsolescence extends beyond electronic parts to other items, such as materials, textiles, and mechanical parts. In addition, obsolescence has been shown to appear for software, specifications, standards, processes, and soft resources, such as human skills.

This chapter describes general definitions and the fundamental issues associated with the occurrence of obsolescence and its management in order to build a consistent basis for this topic. Because obsolescence is most prevalent for electronics, this chapter concentrates on the issues associated with obsolescence in relation to electronic parts; however, most of what follows is also applicable for nonelectronic parts as well.

1.1 DEFINITION OF OBSOLESCENCE

The English word obsolescence is derived from the Latin term obsolescere, which means “to go out of use or fashion.” The associated adjective obsolescent is derived from the Latin term obsoletus, meaning “worn out” (Baer and Wermke, 2000).

Obsolescence, as addressed in this book, refers to materials, parts, devices, software, services, and processes that become non-procurable from their original manufacturer or supplier. As parts become obsolete, users and customers are inevitably faced with a supply shortfall when their demands for the original part cannot be satisfied and no alternate parts are procurable (Atterbury, 2005; Rogokowski, 2007).

Generally, obsolescence is defined as the loss, or impending loss, of the manufacturers or suppliers of items or raw materials, as shown in Figure 1-1 (Tomczykowski, 2001).1 However, a more realistic working definition of obsolescence is when a part (material or technology) that is needed to manufacture or support a product or system is not available from existing stock or the original manufacturer of the part (material or technology).

FIGURE 1-1 Appearance of obsolescence.

There are many possible reasons for obsolescence. Some of the causes of obsolescence include the following:

• Rapid technological development makes a product or part unusable for technical, economical, or legal reasons (Feldmann and Sandborn, 2007)
• The original component manufacturer (OCM) or original equipment manufacturer (OEM) disappears from the market for various reasons (Atterbury, 2005)
• The OCM or OEM is not willing to continue producing a part for economic reasons (usually precipitated by a drop in demand for the part) (Atterbury, 2005)
• Chemical or physical aging processes of parts placed in storage can destroy parts or make it impossible to use existing part inventories in products

Terms such as obsolescence and obsolete are already used by some companies when they provide a product change notification (PCN) or end-of-life (EOL) notice. In such cases, the part is sometimes still procurable for a limited time; that is, customers may have the opportunity to buy parts one last time and store enough of them to meet their systems’ forecasted lifetime requirements. These actions are referred to as life-of-type (LOT) buys, lifetime (last time) buys (LTBs), or bridge buys (see Chapter 7).

1.2 CATEGORIZATION OF OBSOLESCENCE TYPES

The subject of this book is involuntary obsolescence, where neither the customer nor the manufacturer necessarily wants to change the product or the system. Involuntary obsolescence can be categorized as follows (Feldmann and Sandborn, 2007; Rai and Terpenny, 2008):

• Logistical Loss of the ability to procure the parts, materials, manufacturing, or software necessary to manufacture and/or support a product.
• Functional The product or subsystem still operates as intended and can still be manufactured and supported, but the specific requirements for the product have changed; as a result the product’s current function, performance, or reliability (level of qualification) become obsolete. For consumer products, functional obsolescence is the customer’s problem; for more complex systems (such as avionics) it is both the manufacturer’s and customer’s problem. For complex systems, the functional obsolescence of a subsystem is often caused by changes made to other portions of the system.
• Technological More technologically advanced components have become available. This may mean that inventory still exists or can be obtained for older parts that are used to manufacture and support the product, but it becomes a technological obsolescence problem when suppliers of older parts no longer support them.
• Functionality Improvement Dominated Obsolescence (FIDO) Manufacturers cannot maintain market share unless they evolve their products in order to keep up with competition and customer expectations (manufacturers are forced to change their products by the market). Note that this differs from functional obsolescence in that for commercial products FIDO obsolescence is forced upon the manufacturers and functional obsolescence is forced upon the customers.

1.3 DEFINITION OF OBSOLESCENCE MANAGEMENT

To ensure a constant qualitative performance, an obsolescence management plan should be improved continually. For example, the Plan-Do-Check-Act (PDCA) cycle shown in Figure 1-2 is an appropriate way to satisfy this goal. Developed by Dr. W. Edwards Deming, the PDCA cycle is also called the Deming Cycle or Deming Wheel (Seghezzi, 1996).

FIGURE 1-2 PDCA cycle.

To support continuous improvement, obsolescence management organizations must be provided with adequate resources to support necessary activities that are consistent with the organization’s business. The company management (for example, the chief executive officer) is responsible for providing these resources and for establishing an obsolescence management plan within the framework of a dependability management system (IEC-62402, 2004).

The management of obsolescence problems is often referred to as “diminishing manufacturing sources and material shortages” (DMSMS) (Saunders, 2006). As addressed in this book, DMSMS specifically refers to the loss of the ability to procure required materials, parts, or technology.

The process for managing obsolescence is illustrated in Figure 1-3 to mitigate or avoid the impact of supply shortfalls for all types of materials, parts, devices, software, services, and processes during the intended life of a product.

FIGURE 1-3 Process steps for managing obsolescence (adapted from IEC-62402, 2004).

Obsolescence management implies life cycle forecasting and other analyses to identify the effects of obsolescence through all stages of the product life cycle. The cost avoidance associated with various management actions must be estimated. People must be trained, and resources must be acquired to enable personnel to manage obsolescence. An obsolescence management plan must be developed to ensure adequate selection, timely implementation, and tracking of relevant obsolescence management activities. These activities and other related components and requirements are discussed in the chapters that follow.

1.4 CATEGORIZATION OF OBSOLESCENCE MANAGEMENT APPROACHES

DMSMS require addressing the problem of obsolescence on three different management levels: reactive, proactive, and strategic, as shown in Figure 1-4.

FIGURE 1-4 Three obsolescence management DMSMS categories and the resulting outputs (adapted from Sandborn, 2008).

Reactive management (see Chapter 7) is concerned with determining an appropriate, immediate resolution to the problem of components becoming obsolete, executing the resolution process, and documenting/tracking the actions taken. Common reactive DMSMS management approaches include, among others, lifetime buy, bridge buy, component replacement, buying from aftermarket sources, uprating, emulation, and salvage (Sandborn, 2008).

Proactive management (see Chapter 8) is implemented for critical components that have a risk of going obsolete, lack sufficient available quantity after obsolescence, and will be problematic to manage if or when they become obsolete. These critical components are identified and managed prior to their actual obsolescence event. Bill of material (BOM) management regarding obsolete or soon to be obsolete components is an important part of t...

Table of contents

• Cover
• Contents
• Title
• Copyright
• Preface
• Chapter 1: Introduction to Obsolescence Problems
• Chapter 2: Part Change and Discontinuation Management
• Chapter 3: Introduction to Electronic Part Product Life Cycles
• Chapter 4: Obsolescence Forecasting Methodologies
• Chapter 5: Case Study Hardware Forecasts and Trends
• Chapter 6: Software Obsolescence
• Chapter 7: Reactive Obsolescence Management
• Chapter 8: Proactive Obsolescence Management
• Chapter 9: Strategic Obsolescence Management
• Chapter 10: Obsolescence Management Standards and Organizations
• References
• Index