The Cost of Ad Hoc Obsolescence Management

Original Equipment Manufacturers that approach the support of older or legacy designs as a random eventuality often adopt an ad hoc attitude toward production. “Ad hoc” means they solve the obsolescence management issues as they come without establishing a general strategy for adapting to subsequent support requests.

These legacy designs are characterized by low volume, sporadic demand, and a collapsing supply chain resulting from component obsolescence. However, because of customer priority and the allure of the sale, customer requests for these products can be deceptively easy to take on.

This business-case-by-business-case ad hoc approach usually means that the costs associated with continuing to support these requests do not include the extra resources required to sustain these products.

And sustainment is really the issue here because OEMs make their money by delivering the most cutting-edge and active products to their customers, and their organization and processes are developed to fulfill this aim. However, the organization and processes required to support sustaining these older designs challenge business as usual and typically end up syphoning resources away from more profitable work.

This translates into lots of extra work across the organization: scavenger hunts to piece together test fixtures, component counterfeit testing, component engineering solutions for crosses and obsolete parts, and qualifying new suppliers—and some of this may need to occur before a quote can even be delivered. Eventually, everyone is too busy to release new products, support new customers, or expand into new markets, making the opportunity costs associated with sustainment hefty.

And as if all that weren’t enough, most notable, to my mind, is that under an ad hoc strategy, the OEM is unable to develop metrics to measure the impact of unscheduled distractions of company resources on the organization. Having the right information is key to being able to set and reach business objectives that line up behind growth strategies.

–Tania Scroggie