The challenges of obsolescence and how to address them

Author : Enda Ruddy, Converge

15 December 2016

Ask any electronic components manufacturer what is the number one issue that currently concerns them and it won’t be Brexit or production lead times, or keeping up with the latest technology or the component supply chain – nor the growth of the electronics industry in China or even counterfeiting.

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Vitally important though these issues undoubtedly are, most manufacturers will invariably identify component obsolescence as their biggest problem.

It’s fair to say that obsolescence – and, more importantly, how to manage it – has been a problem for some time but more recently it has become increasingly troublesome. Why is this happening, what are the current obsolescence challenges that manufacturers face and what can be done to overcome them now and stay on top of them in the future?

A key factor that accelerated the problem of obsolescence in recent times has been the diminishing lifetime of electronic components. This is clearly an issue for original equipment manufacturers (OEMs) and designers who have created embedded systems that are meant to have a long working life – especially when they are used in devices that have been designed to operate under the sea, in the air or in other areas where reliability is required year after year, even decade after decade.

So how do high-reliability industries such as medical, industrial, heavy transportation, aerospace and defence get around the problem of obsolescence management when they don’t have the volume or buying power that they used to possess? Clearly, options are limited when a chip manufacturer decides to cease building a product line for the high-reliability market because usage is small compared to their other product lines.

As the life cycles of components shrink, the problem of obsolescence increases and OEMs are now having to reduce the long-term plans they had for making products that would include such components. Even the spare parts market is affected. On top of all this, in order to meet the burgeoning demand for parts that rapidly become unavailable – and to get around the not insignificant issues of redesign and recertification – a number of companies are unfortunately turning to suppliers of counterfeit components. Indeed, it has been said that for all intents and purposes obsolescence begets counterfeiting.

However, although we know what the problem is, before we can identify a solution to it we must go back and understand fully where obsolescence originates from in the electronics sector. One of the biggest causes of obsolescence is component manufacturer mergers and acquisitions, which have an inevitable impact on the longevity of supply chains and the availability of various components. Often instigated as companies try to enhance their offerings for the growing Internet of Things (IoT) market, mergers and acquisitions almost inevitably contribute to product availability issues, not least because certain products become end-of-life (EOL), part numbers are altered, there are changes in the manufacturing process which influence lead times and – of course – cost becomes an issue.

Also allied to the after-effects of mergers and acquisitions, another major cause of component obsolescence is the often unwieldy length and complexity of supply chains that can emerge. Seriously problematic communication channels can develop within the chains as OEMs, contract manufacturers, distributors, test houses and quality professionals all have their own input and their own demands. To make matters even worse, while franchised distributors are obliged to abide by official agreements to market and sell components on behalf of the original component manufacturer, independent distributors are not.

Yet another influencing factor in the increase of electronic component obsolescence is the need to satisfy increasingly stringent and demanding legislation, including meeting the requirements of updates to, for example, the European Union’s regulation for the restriction, evaluation, and authorisation of chemicals (REACH) and the directive for the restriction of hazardous substances (RoHS).

To add to the problem, obsolescence is directly affected by the fact that the electronics sector is driven by huge amounts of data (according to IBM, the world produces 2.5m Terabytes of data every single day) and this creates a strong need for standardisation and automation.

In fact, it’s fair to say that there is a fundamental disconnect between the collection of data and the actions that are derived from it. If used correctly, of course, data can help companies to develop pro-active solutions to obsolescence management and this has to be much better than attempting to solve the problem reactively – which takes up valuable time, resources and money and obviously spends these when the problem has already occurred. Clearly, to address the issues posed by critical components not being available, it’s helpful to have all the relevant information available about those parts – but that can mean an enormous amount of data.

There is, of course, a direct correlation here with poor data integrity which makes it essential for those in the industry to stay up to date with the relevant manufacturers’ data releases and to keep an eye on major news sites that deal with this issue. Component manufacturers usually communicate well, but often critical obsolescence data is missing or not enough notice has been given of any important changes. Indeed, a recent study showed that more than 40 percent of electronic components that were made obsolete were discontinued without the industry being informed by the component manufacturers. Worse still, 30 percent of those became obsolete immediately.

At the same time, it must be acknowledged that it isn’t just obsolescence in components that is the issue here – closely related to the problem is obsolescence in skills and in software, with a diminishing number of people available who can run, code or program existing so-called ‘legacy’ systems. It also doesn’t help that there is a serious lack of appetite within the electronic components industry to focus on internal investment to solve the obsolescence crisis.

Often with legacy systems the only real choice is to buy obsolete components. This could be the best solution for an assembly that was being retired or if a customer needed to buy themselves time for a redesign, for example. The buyer might have weighed up the costs involved in redesign and certification against the cost of buying and storing obsolete parts and decided on what was the most financially viable option. Whatever the scenario, customers clearly need to make decisions based on their current business needs and objectives while being fully aware of all the options that are available.

Putting legacy systems to one side, it is clear that it is no longer viable for users simply to develop reactive solutions to component problems as they arise. Because of the combination of extended timeframes, increasing costs and diminishing sources of supply, companies are being forced on to the front foot in terms of obsolescence management.

But what does this mean? How can customers be influenced in how they choose to handle the obsolescence issue? How can uncertainty be eliminated for those who want to find reliable sources of components? How is it possible to ensure companies have the intelligence needed to make component procurement decisions confidently?

To begin with, it must be stressed that obsolescence management has to run across many departments in a company, and no longer be seen solely as an engineering issue. One solution could be for obsolescence management to become identified as a stand-alone discipline or become a recognised procedural point during design and development stages. At the same time, each critical component could have multiple qualified alternatives from different manufacturers and different geographies to safeguard against technical aspects as well as environmental challenges.

This would be an ideal scenario but, in truth, getting to this position will take some time. A more immediate and much more realistic solution would involve companies being disciplined to select the best supply chain partner in the realisation that this is critical in creating a solid obsolescence management plan that will minimise the risk of disruption in the supply chain. Manufacturers should be looking to set themselves up with reliable business partners who provide EOL services for components. These services can include predicting the obsolescence of components, financing a final purchase or going to the open market to source an authentic replacement product.

To conclude, obsolescence management issues should no longer be accepted as just an inevitability that cannot be avoided. Indeed, more and more companies in the electronic components sector are coming to realise that with sound planning and long-term vision – along with solid, top quality supply chain partners – it is certainly possible to tackle the problem head on. If customers of critical parts can pro-actively take control of the issue through a proper obsolescence management programme – in which they take executive ownership of solutions to the problem rather than just a reactive executive accountability approach – they can eliminate the difficulties in sourcing components while at the same time moving away from a short-sighted attitude to skills and knowledge sharing.

In developing skills that are vital in today’s rapidly changing marketplace, companies should make the correct use of enterprise resource planning (ERP) software and customer relationship management (CRM) software to enable knowledge to be shared throughout the organisation. Other tools that companies can use to ensure skills and knowledge remain within their organisation include artificial intelligence and machine learning.

Obsolescence is clearly a major problem but the extent of how it affects an individual company depends heavily on how pro-active that company has been and can be in the future. Only by involving all departments and all parties in the supply chain – and working collaboratively with everyone involved – can companies hope to embrace best practice and look ahead with confidence. 

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