Buyer beware — broken, defective, older, or discontinued ‘parts’ may be harder to replace. A new report finds that obsolescence of mechanical parts, electrical and electronic components, and software and digital infrastructure is accelerating, with software and digital components being the most often affected.

According to Managing Obsolescence, a report published in July by PMMI Business Intelligence, a division of PMMI, The Association for Packaging and Processing Technologies (which organises the Pack Expo portfolio of trade shows), the major force driving obsolescence is the development of new technology, but failures, digital incompatibility, and material cost and availability also play a role.

Respondents indicated that obsolescence events are increasing or have remained steady, with 52% of End Users and 49% of OEMs/CMs reporting that obsolescence events have been increasing over the last five years. Both End Users and OEMs noted that electrical/electronic and software/digital components experience more frequent obsoletions than mechanical components.

End Users and OEMs/CMs identified slightly different drivers for obsolescence, but all respondents/stakeholders agree new technology development is the most influential:

• End Users reported new technology (59%), digital incompatibility (37%), and breakdowns and failures (36%) as top drivers.
• OEMs/CMs reported new technology (80%), low-demand and low-margin items being cut (39%), digital incompatibility (37%), and material cost and availability (37%) as top drivers.

The report explained that Stronger coordination across the supply chain and within organisations can support more effective planning, reduce disruption, and improve response to future obsolescence events, per the report. The analysis of the operational impact of obsolescence describes how end users, original equipment manufacturers (OEMs), and component suppliers can overcome gaps between industry needs and current practices.

The report found that despite the costly and disruptive nature of obsolescence, a substantial number of end users, OEMs, and component manufacturers have not established a formal process to address it; nor do they have a dedicated obsolescence manager. Communicating obsolescence can be challenging, considering the diversity of strategies organisations use to manage obsolescence:

• 58% of End Users and 67% of OEMs/CMs do not have a dedicated person or department responsible for obsolescence.
• 26% of End Users and 36% of OEMs/CMs note they split obsolescence responsibility between multiple departments.

Additionally, obsolescence communication timelines and the time during which obsolete components are available tend to be shorter than industry preferences. Expectations for obsolescence notification timelines and obsolete part backstocking mostly align across all stakeholders, but there is always room for improvement. Both End Users and OEMs note the more time, the better:

• 78% of End Users and 81% of OEMs say notification lead times are typically three years or less.
• Both groups also note a preference of 1-3 years as the minimum acceptable period that obsolete parts should remain available for purchase. This is true for all component types: mechanical, electrical/electronic, and software/digital.
• 52% of OEMs and 72% of CMs note they keep obsolete components backstocked for three years or less.

Communication and backstock expectations are an ongoing challenge for all stakeholders, with a plurality of End Users (44%) and a OEMs/CMs (52%) noting they do not have a formal process for obsolescence.

PMMI revealed that to mitigate the negative effects of obsolescence, end users rely on back-stocking, seeking alternatives, purchasing new machinery, and extending component life via preventive maintenance programs. They want OEMs to communicate obsolescence events as early as possible, avoid custom components, and assist in planning for and mapping obsolescence challenges.

However, OEM obsolescence management tactics primarily focus on providing conversion kits, creating new components, and selling new machinery. According to the report, OEMs would also like early communication and assistance with planning and mapping potential obsolescence events. In addition, they want component manufacturers to be more transparent about R&D cycles and explain why a component is being discontinued, offer alternatives, and provide estimates of product lifespan and conversion kit costs.

The report concludes that all stakeholders have a role to play in communicating, planning for, and managing obsolescence events. Collaboration and more formal processes would help prevent obsolescence events that trigger cascading impacts across multiple components or systems or result in a premature lack of back-stocked components.

OEMs and component manufacturers should prioritise proactive communication and provide as much lead time and supporting information as possible when issuing obsolescence declarations. They also should be prepared to communicate this information to multiple contacts and departments within organisations, according to the report.

To manage future risks and costs, end users would benefit from the data needed to factor obsolescence into total cost of ownership calculations and into upfront offerings such as proactive service agreements and component planning strategies, PMMI advised, adding that managing obsolescence requires earlier communication, stronger planning and closer collaboration among end users, OEMs and component suppliers.

Vanessa L Facenda is editor of Tea & Coffee Trade Journal. She may be reached at: [email protected].