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Dealing with the problems of obsolescence

When we asked readers what were the critical issues facing their company, many replied along the lines of dealing with obsolescence and the related topic of counterfeiting.

Stuart Kelly, chair of the Component Obsolescence Group (COG), believes obsolescence is a growing problem. "It's being driven by projects that need to keep something in the sky or under the sea for 30 years," he said. "Designers are being forced to go down the commercial route and product manufacturers are facing inevitable obsolescence. As the life cycles of components shrink, the problem increases."

Obsolescence, in Kelly's opinion, should be equated with risk. "More companies are realising they have a risk and understand they need to do something about that risk. While military projects were an early driver of obsolescence management, COG is now dealing with issues in the oil and gas, rail and nuclear industries, amongst others. These industries face the same issues, as do any with long life projects."

So, faced with the problem of obsolescence, what can designers do? "Companies need to develop a proactive management capability," Kelly advised. "They need to plan and they need to apply procurement tools. The key is to understand all the parts in a project and the risks involved if and when they become obsolete. Put measures in place now so the impact in the future is mitigated."

Tools are available which highlight problem parts. "Managers can input a project's bill of materials and get an output in the form of 'traffic lights'; red means parts are obsolete, amber means there are issues. It could be the component only has a single source; if that source goes, there's a problem."

Amongst the 'hidden costs' of obsolescence are redesigns and requalification. "Obsolescence tools can point to potential alternatives," Kelly noted, "but the issue here is that a design may need to be subjected to a new clearance or qualification process for that change to be approved.

Kelly says avoiding redesign or requalification is important. "Statistics show redesign is a major expense. If you don't have proactive obsolescence management, you will be doing redesigns all the time, with an impact on through life cost."

Obsolescence can depend on your position in the supply chain. System builders may be more exposed, Kelly suggests. "The 'box' you're building may feature 100 components and the life cycle of each component can't be guaranteed to be for the life of the 'box'. That's a classic obsolescence risk and mitigating that risk means managing the parts."

One way in which companies can handle this aspect is by insisting on adherence to standards. Kelly highlighted IEC62402:2007 as a suitable standard. "One important thing to do," he advised, "is to cascade obsolescence management down the supply chain to make sure your suppliers manage risk for you. Contract them to procure components in accordance with the standard."

Another aspect, often overlooked, is software obsolescence. Sometimes, said Kelly, this can be to do with how the code is stored. "Access to software can be difficult if it's held on a floppy disk, for example – it happens in industry.

"There's also the issue of skills. A lot of software has been written in older languages – Cobol – for example. Getting hold of people with the right skills and experience is difficult."
Procurement departments can also help. "We're exploring the role procurement has to play," Kelly pointed out. "It clearly has a role as they are the people with the contacts and who are often first to know that something is obsolete. Looking for alternative devices is important, but they need to ask themselves whether they are buying something that brings risks with it. Selecting a cheaper part could be costly in the long run."

And that's an area of the market at which counterfeiters are looking. "It's logical for counterfeiters to target obsolete parts," Kelly accepted, "particularly when companies are struggling to get hold of them. Obsolescence drives counterfeiting; it's a high risk area and managers looking for alternative products need to be careful."

Graham Pitcher

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In my opinion, this is a very well-written article that offers good advice on a realistic approach to dealing with obsolescence.

My company, Secure Components, specializes in shielding supply chains from counterfeit components in situations when items must be procured from an "other than authorized source". Companies that still allow buyers to utilize Google or part search sites to buy parts from non-franchise sources are exposing their organization to a significant risk of receiving a counterfeit part.

Most of our clients are in the Defense, Aviation, & Space Industry, and they require authentic obsolete material and understand the need for a specific process when doing so.

However we find that many companies claim they want quality; however, only a few are willing to pay the cost of authentication testing. Furthermore, the majority of them are resistant to work within a process that can effectively protect their supply chain. Our experience tells us that generally, companies most interested in dealing with a certified supplier that demands testing, are those who have had their supply chains infected with a fake part.

Many of the companies we determine not to be a good fit for our company tell us they actually believe their current supplier would not send them parts bought directly from the Chinese broker market. However, they have nothing in writing to validate that statement. When we ask these same companies/buyers if they can provide a test report so we can provide an “apples to apples” comparison of what we are quoting, they generally claim they do not possess a test report that demonstrates what if any testing has been performed.

That is very risky in today's market because it’s not a matter of if they will receive a counterfeit part—but when. As an independent distributor, Secure Components has gone to great expense to become the first company in the world certified to AS6081, an internationally recognized Counterfeit Avoidance Standard specific to electronic components.

In June of 2013, the AS6081 Standard was adopted by the Department of Defense. Additionally, we are 1 of 10 companies that are QTSL Qualified for the Defense Logistics Agency, which makes us eligible to sell them obsolete microcircuits. We offer clients the option to sign a non-disclosure and then learn the source we are procuring the components from.

If we must go to China, our clients will know about it upfront. The part application along with the source we are procuring them from are significant influences on the amount of authentication testing that will be required. Ultimately, that will drive the cost. However, if you care about quality, it is essential.

Our clients are actively involved in the risk-assessment process and engaged with the authenticity and functionality testing. Transparency by all parties, risk assessments, and test reports are 3 critical components in dealing with an “other than authorized supplier” of the material you are purchasing. My advice to procurement teams is as follows: When getting a quote on material from an “other than authorized source”, be sure they have a CAP (Counterfeit Avoidance Program) in place that is accredited. A good independent distributor will insists quality is more important than profit, which means risk assessments and most likely testing.

Posted by: Travis Thoman, 31/07/2013

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