How OEMs can manage component obsolescence
01 March 2019
The list of challenges facing electronics OEMs today includes: Brexit, and the associated risks of disruption arising, in many different guises; the rise of electronics industries in low cost geographies, such as Asia; the rapid pace of technological change; and the concurrent need for faster production lead times.
This article was originally featured in the Electronics Outsourcing supplement in the March 2019 issue of EPDT magazine [read the digital issue]. Sign up to receive your own copy each month.
But, critical though these issues are, as Chris Wootton, CEO at EMS provider, Chemigraphic explains, it can be easy to overlook seemingly ‘day-to-day’ challenges, that in reality can have a catastrophic impact on the supply chain and manufacturing process.
Sudden limitation of supply due to component shortages is currently a hot topic, but outright component obsolescence – and the need to manage the risks it poses – is a specific associated problem that many OEMs (original equipment manufacturers) tend to overlook, or at least fail to sufficiently prepare for.
The accelerated risk of obsolescence
The diminishing lifetime of electronic components is undoubtedly an issue, especially for those supplying the high-reliability medical, aerospace and defence industries. The embedded systems used in these products are designed for particularly long working lives. Electrical components, however, increasingly aren’t.
For defence OEMs in the past, obsolescence could be circumvented thanks to the volume and buying power they enjoyed. But, this is no longer the case.
Time and time again, we see chip manufacturers placing products as end-of-life (EOL) that are required by high-reliability market providers. The simple fact is that usage is now so small compared to other more profitable product lines.
And as the life cycles of components shrink, we see counterfeiting risks growing.
To meet the swelling demand for disappearing parts – to avoid redesign and recertification requirements – some OEMs are relying, wittingly or unwittingly, on grey markets and counterfeit components. This situation is fraught with its own considerable risks.
Another factor leading to increased obsolescence is a rash of mergers & acquisitions throughout the supply chain.
This is occurring as component suppliers look to enhance their offerings to meet the demands of new emerging markets such as EVs (electric vehicles), smart devices and the Internet of Things (IoT).
With every purchase or partnership, the risk of component obsolescence increases. More products are struck off the list as lines are reviewed, rationalised and trimmed.
The after-effects of mergers & acquisitions has led to unwieldy and complex supply chains.
These create problematic, diffuse communication channels that can lead to missed notifications, poor communication and increased lead times.
Other causes for component obsolescence include:
• Lack of demand, making it unwise for manufacturers to continue their support
• Suppliers going out of business – or a catastrophic accidental damage to stock
• Diversion of raw materials into other more lucrative areas, causing legacy support to become less attractive
Many components are retired simply because they have been superseded, or no longer satisfy the increasingly stringent demands of legislation.
For instance, updates to the European Union’s regulations for the restriction, evaluation, and authorisation of chemicals (REACH) and the directive for the restriction of hazardous substances (RoHS) caused many EOL notifications.
What are your options when component obsolescence occurs?
Notifications can be easily missed or offer a very limited time for decision making.
Component manufacturers issue stock obsolescence risk flags including:
• Product change notices (PCN)
• End of life (EOL)
• Last-time buy (LTB)
• Last-time ship (LTS)
However, if OEMs are not relying on a partner to monitor these for them, such flags are notoriously easy to miss. And some estimates have placed the proportion of components going EOL without any notice at all as high as 40%.
Often parts may only be ‘technically’ obsolete, but still available under a different part number.
It’s vital that all parties understand the market and technological dynamics that can lead to physical parts being renumbered, following a change in supplier or manufacturer. Once again, this requires in-depth knowledge and monitoring of the entire supply chain.
By working with a manufacturing partner which is dedicated to watching the market for signs of change, and has the knowledge to react to this and find suitable alternative routes, this process can be managed effectively without compromising timescales or cost.
Thankfully, there are data-driven software tools that can scrub your Bill of Materials (BoM) and highlight any at-risk components.
Such predictive tools will reveal both EOL components and identify components considered at high risk of becoming obsolete. From here, of course, you can make the decision to identify last-time buys or replace the component.
The importance of an expert EMS partner
OEMs tend to focus on designing function, validating their creations and developing peripheral items, such as a functional test regime.
Yet the ultimate commercial success of any electrical product hinges just as much on having a fully developed and sustainable supply chain supporting it.
Even the most radical designs often have their roots in existing circuit architecture.
Your contracted manufacturing partner can scrub the existing BoM to suggest changes required – it is often tried-and-tested components that slip under the radar.
The risk of obsolescence can be mitigated by engaging early with an EMS partner that has an expert overview of all the current developments in the material market.
Of course, this early engagement in design is critical for optimising performance, as well as managing obsolescence. Your EMS partner can help guide you to optimised materials selection while the design is still fluid. Once the product has undergone extensive regulatory validation, it rarely remains cost-effective to make changes to minimise component lifecycle risk or to improve performance.
In addition, trusted EMS partners will not only flag obsolescence risk. They will also be able to mitigate this risk before it occurs, with viable and appropriate alternative suggestions, ensuring 100% BoM compliance.
In today’s dynamic global marketplace, reliable sources can suddenly come to an end. Only EMS partners with an entirely robust customer authorisation process can ensure compliance in all circumstances. Part obsolescence cannot be avoided – but it can be managed, minimised and mitigated
Today’s rapidly changing supply chain will continue to throw up obsolescence challenges for electronics manufacturing.
That much is inevitable. But, by partnering with someone who offers you access to a robust, trusted supply chain you can minimise risk and maximise viable, cost-effective solutions. With sound planning, a proactive approach and long-term vision – along with solid, best-in-class supply chain partners – the threat of component obsolescence certainly loses its bite.
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