The Limitations of a Product Change Notification
The issuance of a product change notification (PCN) from a component manufacturer has become a key part of an OEM’s production process. While each component manufacturer will have their own unique policy regarding PCNs, essentially their goal is to notify customers of an impending decision that may impact their supply chain. For example, if the demand for an electronic component such as a resistor suddenly drops, the component manufacturer may choose to no longer offer it, choosing instead to dedicate their machines to offerings with higher potential profit margins. Instead of suddenly cutting customer inventory streams however, the component manufacturer chooses instead to notify their customers far enough in advance for them to make a decision that ensures the integrity of their product. Such a decision could be the making of a last time buy, the transition to an alternative component, or the search for an alternative component manufacturer who offers the same component.
Component manufacturers are well-aware that last-minute changes can have significant financial consequences for long-standing customers, and they try to make every effort to make the transition as smooth as possible without any lasting damage to their reputation. After all, just because one component is ceasing production does not mean the customer will not have need of another in the future. The issue, however, is that the current state of the electronics manufacturing market is showing the limitations of the current “PCN culture” and the dangers of OEMs over-relying on them when determining the future makeup of their supply chains.
Traditionally, the average window component manufacturers give their customers is six months. However, especially following the rise of IoT adoption in everything from “smart cities” to personal devices to automotive products, the average lifespan of generic electronic components can be as short as one year as demand continually shifts to newer components that are smaller, thinner, faster, or more energy efficient. In an effort to keep moving forward with finite production capabilities, a six-month window to allow customer supply chains to adjust is no longer realistically feasible; if production capabilities have to account for large last time buy orders for six additional months when the next component is expected to have a one-year lifespan, it limits the manufacturer’s ability to maximize revenue within the limited window they have to do so.
As a result, product change notifications have gradually begun to shorten the window of opportunity for OEMs to react. What was once six months has become, occasionally, a few months or even a few weeks. In some extreme cases, the PCN might even come with an immediate last time buy date. If the OEM does not have a comprehensive process in place to receive and view the PCN the moment it is issued, it might already be too late to react. This typically leaves two options: either enter the open market and purchase components from third-party suppliers at significant markups, or commit to a costly product redesign.
A newer, faster marketplace requires a rethinking of how OEMs determine when to adjust their supply chain. One option is to adopt a platform capable of monitoring the company’s bill of materials. Partstat BOM Monitoring, for example scans the Internet every 15 minutes to see if any PCNs relevant to a customer’s bill of material have been issued. If one is found, they will be immediately notified, and the PCN itself will be available to view right from the customer’s dashboard. But beyond the issuance of PCNs, Partstat BOM Monitoring uses over 50 billion data points of Big Data to accurately predict both obsolescence and allocation issues weeks or months before the component manufacturer notifies the customers.
Such solutions are no longer a luxury; to survive in today’s market, OEMs need to start rethinking how they can better respond to obsolescence without relying exclusively on the PCN. The financial consequences of not doing so are too significant to ignore.