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Planning for the Afterlife

Regardless of your market sector, at some point you'll need to make the decision: Keep a product on life support… or pull the plug?

Most semiconductor manufacturers hope to keep their product designs alive either until the competition out-designs and under-prices them or the demand evaporates. When either will happen, whatever the reason, is something few OEMs can control.

The decision whether to keep a legacy product active or retire it can become a real balancing act. Product demand, technical support, component availability, competitive landscape, required resources, new product introduction, and product roadmaps all play their parts. And, unless and until the decision is made to retire a product, the evaluation and analysis are ongoing. Return on investment (ROI) and market matrices are always on the move. They must be monitored constantly.

Lifecycle expectations have a large impact on forecasting demand for ongoing product support. In the world of finished goods, consumer electronics have an average life expectancy of nine months, commercial products about two years, industrial three, medical devices five to seven, and military up to twenty years.

While a component is still being actively manufactured, the demand volume and lifecycle are often somewhat known in advance. Ramp-ups and ramp-downs for a product manufacturing line can usually be planned beforehand, at least at some level. However, once a product has reached end-of-life (EOL), the demands change. Forecasting EOL demand is different from forecasting demand during the life of a product. Basing spare parts demand at EOL based on demand in the manufacturing phase is difficult at best.

Typical problems related to the EOL phase in the product lifecycle are very uneven demand patterns, difficulties in ordering — or even locating — spare parts, and a high probability of stock-outs or shortages. For most parts, the need to support warranty and maintenance requirements lasts longer than the period during which the necessary components are available from the manufacturer.

When it comes to EOL planning, the ultimate goal is to ensure that there will be enough (but not too much) of the right components in stock, throughout the life of the product. However, determining when to replenish a given SKU and the quantity to inventory and store can be problematic. Since EOL doesn't last for the same number of months or years for all products, over time the complexity increases as more EOL products are added to the mix.

There are multiple approaches to managing EOL parts procurement and management. Whatever the approach, with the potential need for thousands of items to be inventoried and managed, a systematic approach is an absolute requirement.

Setting up an internal process is one way to handle EOL component management, especially when the number of products is small and life expectancy is short. However, given the ongoing nature of the process, as additional products reach EOL, OEMs can expect to have to increase the resources and budget allocations for EOL planning, management, and inventory control.

Another approach, especially when the number and volume of components is large, is to partner with an independent distributor with the capacity and capability to provide ongoing EOL component management and support for any number of products throughout their entire active lives. This relieves the OEM of the need to divert resources from its core business to address the myriad issues associated with EOL planning and management and makes it possible to budget more accurately for them.

Have a comment or a horror story about EOL? I'd love to hear from you.

5 comments on “Planning for the Afterlife

  1. Nemos
    May 24, 2011

    A lot of people they don't know that the products they buy have a EOL time. I believe even if it is very costly to have stock to support out of date products it gives a sense to the customer that the product he bought is reliable. Furthermore, it is not a good tactic to “kindly forcing” the customer to update his product, because you don't have set an afterlife plan.    

  2. prabhakar_deosthali
    May 25, 2011

    In the automobile industry there is a legal requirement ( In India at least ) that for every vehicle model on the road, the spare parts should be guaranteed for at least Seven years from the date of its delivery to the customer. This automatically forces the  responsibility of planning for the spare parts supply onto the vehicle manufacturer. For electronic products , I do not know whether such legislations exist or not. But it may be advisable on part of the governments to make such legislations for mandatary supply of spare parts at least for the products which fall in Health-care and military category.  This will enforce some kind of guranteee of spare parts supply till the EOL of a product.  Once the manufacurers are legally bound they will automatically force their parts suppliers to enter into similar legal agreements for the supply of the spare parts.  In the absense of such legal frame work, the manufacturers themselves should proactively make it clear to their customers, the period beyound the guarantee period, for which there will be assured supply of spare parts. The pricing structure can take care of the cost escalation for the parts manufacturer as the production of a particular part is ramped down.

  3. FLYINGSCOT
    May 25, 2011

    We had an old RF product that sold in reasonable quantities but never set the heather on fire.  However after several years and unbeknownst to us a customer of ours had been working on a product using our part that had just hit the mother lode.  When they asked for us to ramp up the product we were informed by our exteral silicon supplier that the particular silicon process was now EOL and all the relevant equipment was now disposed of.  We did not foresee this as we had thought we had bought enough EOL wafers to satisfy our meagre demand for several years to come. We could not recover the situation, upset our customer and lost a potentially very lucrative deal.  It was not possible to design or offer another part as the RF technology was so specific to that customer's application.  Moral of the story is that one needs to manage one's own EOL situation but also keep on top of all your suppliers and customers too.

  4. Backorder
    May 29, 2011

    In most cases I have come across, end customers who are sensitive to EOL issues like the medial, military, government facilities et al. take care to ensure their BOM would be supported by suppliers for as long as they need. Although,  it is essential to provide the right amount of lifetime support to your customers, keeping a useless stock of components is also a sin for inventory managers.

  5. mario8a
    May 29, 2011

    Hello

    our company makes a very good job on keeping products that should be EOL long time ago, those products are rarely offered in catalogs or retail dsitributros.

    even those products will cost a lot of many just to keepo the inventory or setup the production line for a few quantities, some customers are loyal to those products.

    Recently we had a customer complaint, the customer shipped the product to our company and asked to get it fixed not replaced, the product was adquired 30 years ago and it was still in operation (headset for tower control), we  fixed and shipped back to its owner.

    Regards

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