Short Product Lifecycles Are Affected by Obsolescence Too
Obsolescence, in some form, impacts each and every industry that manufactures a product to meet the demands of a consumer base. But just as no two products have exactly the same design or function, no two products experience obsolescence in quite the same way.
One of the most important factors in understanding how obsolescence will manifest itself is the anticipated lifecycle of the OEM product. Long before production of the product begins, it’s critical that OEMs craft an obsolescence management strategy that takes the product’s expected lifecycle into account, and understand how such a length can help supply chain professionals anticipate the problems that could arise before they threaten the integrity of their brand.
In many cases, these lifecycles are getting shorter, not longer. In 2009, Stanford Graduate School of Business released a study that showed that Americans now, on average, purchase a new cell phone every 18 months. Europeans, by contrast, buy one every 15 months, while the Japanese buy one every nine months. While this study was done with the intention of analyzing consumer “e-waste,” these figures are a good representation of a growing trend of how consumers are becoming comfortable with replacing current technologies with newer, faster, more efficient iterations in increasingly short order. The reasons why shorter buyer cycles for high-end technology have become the new normal for certain consumer-facing industries such as cellphones and wearables are worthy of an article of their own, but this expectation has allowed OEMs to pursue higher revenues by adapting their business models to cater to these rapidly expanding markets.
With the lifecycle of electronic components already declining, common sense dictates that obsolescence should become less of a concern if consumer product lifecycles are also declining. In fact, the opposite is true. Component manufacturers do not build their production calendars around current offerings; rather, their production lines are determined based on where they predict the market will go with the expectation of being “first,” which allows them to leverage buyer competition at its strongest point and command higher prices. As a result, many electronic components and semiconductors are seeing lead times beyond 52 weeks before they are even formally introduced. By the time initial orders are filled, component manufacturers have already moved on, leaving late adopters to scramble for critical inventory through unauthorized third-party channels. Not only do these channels place significant markups on their prices, but the OEMs also must accept the added risk of dealing with a supplier that may have a less-than-ideal commitment to transparency. At its logical extreme, such a strategy significantly increases the likelihood of incorporating counterfeit components into OEM designs.
To cope, OEMs who choose to create offerings with shorter product lifecycles must implement an obsolescence management strategy that avoids as much of this competition as possible. Partstat’s BOM Monitoring, for example, allows OEMs to analyze the state of the market for each individual part on their bill of material based on 50 billion points of Big Data. Not only does this Big Data allow us to immediately notify customers when a component is obsoleted or put on allocation by a manufacturer, but customers can actively predict when these actions may occur. This knowledge can put OEMs weeks, or even months, ahead of their competition to ensure that their inventory needs are met without unexpected disruption.
Just because your industry does not necessitate the extended lifecycles that define healthcare and aerospace products doesn’t mean a proven obsolescence management strategy is any less important. To the contrary, it’s absolutely essential to ensuring your products have a fighting chance to win consumer hearts and minds.