The Truth About Product Change Notifications
The ideal obsolescence management strategy requires transparency from all parties involved in the supply chain. These parties include the equipment manufacturers (OEMs) who design the consumer product, the EMS providers who assemble them, and the component manufacturers (OCMs) who provide the critical components necessary to bring the OEM’s vision to life.
But when complications arise from one party, all stand to face the repercussions.
Few examples reflect this dynamic more clearly than the role product change notifications (PCNs) play in any given supply chain. As a product continues to mature throughout its extended life cycle, the OEM becomes increasingly reliant on PCNs to guide their financial decisions regarding that product moving forward. If a critical component has been transitioned into obsolescence by the OCM – and that OCM has given a large enough window to allow their customers to take action — then that will lead the OEM to either initiate a last time buy to secure the sufficient inventory, seek alternative components, or, in extreme cases, redesign the product. In nearly every case, OEMs will choose the last time buy, if possible.
Such a choice is not ideal for the OEM – OEMs would much prefer the electronic components they require be available for the entire life cycle of their product – but OEMs with a sound obsolescence management strategy understand as well as anyone the life cycle mismatch between OEM products and their critical components. They know there are times where a last time buy becomes necessary, and, sometimes with the help of a valued supply chain partner, plan for them accordingly.
Too often though, OEMs don’t even get the opportunity to make that decision.
The truth about the current state of the manufacturing industry is that there is no industry standard requiring OCMs to notify their customers of critical components transitioning toward obsolescence – and even if a PCN is issued, its contents can vary wildly.
The scenarios regarding PCNs are nearly endless. Sometimes a PCN is issued for a product, sometimes not. Sometimes a PCN is issued, sometimes it is lost in an email inbox or sent to employees not responsible for the management of the OEM’s bill of material. Sometimes a 12-month window is given for OEM customers to react, sometimes the PCN contains an immediate last time buy date.
Here are a few incredible statistics regarding PCNs:
• In 2015, over 300,000 electronic components were transitioned into obsolescence.
• Of these components, 41% were transitioned into obsolescence without a PCN. In 2016, that number rose to almost 50%.
• Of the end-of-life components that were accompanied by a PCN, over 40% had an immediate last time buy date. 4% of these were given a last time buy window of a year or more, and only 5% were given a 9 to 12-month window.
In times where a last time buy is no longer a possibility, redesigns prove too costly, and alternative critical components cannot be found from competing manufacturers or third party vendors at acceptable prices, many OEMs have no choice but to discontinue their product. Not only can this have a significant effect on an OEM’s long-term revenue, but more importantly doing so can have incalculable consequences on consumer goodwill. History has long shown that quality products introduced at the right price will find a consumer base, but once the relationship between those consumers and a brand has been tarnished, recovering that image takes time. Time that no responsible OEM should assume they have.
This is why it is so important for OEMs in today’s marketplace to include tools in their obsolescence management strategy that not only can confirm end-of-life components, but predict obsolescence before a PCN is even a concern. OEMs cannot control how OCM partners notify their customers of obsolescence, but there are solutions available – such as Partstat’s own Last Time Buy Solution – that allow them to prepare for whatever the future may hold.
PCNs can be very helpful, but their issuance does not have to determine the fate of your company’s product. If you are concerned about how unpredictable PCNs are affecting your product’s life cycle, let us know!