To Overcome Obsolescence, One Last Time Buy Isn’t Enough
The Obsolescence Problem
Component obsolescence is a widespread issue, and one that is never fully resolved. Unless a manufacturer chooses to source all necessary components in-house (a luxury in the age of global, decentralized supply chain networks), its ability to maintain extended production schedules is largely determined by its suppliers’ ability to provide regular streams of critical inventory. And, when such critical inventory transitions toward obsolescence, the manufacturer must trust the supplier to provide a timely product change notification (PCN) with a manageable last time buy date.
This ideal scenario is hardly a given — an estimated 50% of electronic components and semiconductors are obsoleted without the issuance of a PCN of any kind — but even when everything goes according to the manufacturer’s wishes, there remains a profound degree of risk. This is because manufacturers for a single build do not have to deal with a last time buy, but last time buys. A lot of them.
It’s Never Just One Last Time Buy
The defense industry is a particularly grueling example. The typical defense platform needs to last 20 to 30 years, but due to its use of commercial technology, the components to both build and service it only have lifespan of approximately 18 months before transitioning toward obsolescence. In fact, it is not uncommon for 70-80% of the electronic part content of avionics and military systems to be obsolete prior to the very first system being launched.
If a single build requires dozens, hundreds, or even thousands of last time buys before its scheduled discontinuation, the likelihood of a project manager or engineer being fully informed of each and every last time buy date is extremely slim. One missed email or notification is all that it takes to potentially delay production, initiate a costly redesign, or in extreme cases, even discontinue the product entirely.
Make Last Time Buys With a Go-Forward Strategy
This is why when working with our customers who take advantage of our EOL Last Time Buy Solutions, we always recommend transitioning toward a Go-Forward Strategy. Essentially, this means that for the lifetime of the product, Partstat will use our own capital to purchase any inventory that is marked for obsolescence the moment a last time buy date is issued.
As a result, any issues that may occur due to unexpected obsolescence — tied up working capital, production delays, confusion of responsibilities between EMS companies and their OEM partners — are eliminated. There are no term limits; we love long-term platforms, and we are more than happy to make each and every last time buy your product requires for the next 10, 20, or even 30 years, preserving a healthy level of working capital the entire time which can be reinvested into ROIC.
Long-term platforms that require multiple last time buys require a long-term solution — one that can only be found at Partstat.