Everything gets old at some point and becomes obsolete. This happens more frequently in today’s world, since technology is changing so rapidly. We can find obsolete components in industries such as medical, IT, energy, robotics, military, aviation and many more. This situation is considered a major challenge since a component becomes obsolete by a manufacturer every 12 hours. When this inevitable event occurs, companies need support from their supply chain partners such as end-product manufacturers, original component manufacturers, and component distributors, in order to manage the problem. This situation also brings many issues for engineers because redesigning is time consuming and very costly.
There are different approaches that companies can take when a last time buy decision has to be made. One approach is to directly place an order with the component manufacturer. In this case, the company has to self-finance and store the inventory for future use. The negative aspects of this option are that the inventory sits on the books, capital is tied up and insurance and storage costs substantially increase. To contract with an authorized distributor like Avnet, Arrow or contract with a CEM can be another option. These alternatives help companies with capital preservation and keeps inventory off their books. This helps save time and money by keeping track of what’s been ordered and omitting inventory recounts, which ensures that the company records are more accurate. The downside of going with this approach is that it brings high financing costs and short consumption terms.
Another efficient way to manage last time buy is to contract with an inventory ownership company specializing in electronic components, financing and fulfillment. With this option, inventory remains off the books and the company can preserve their capital, lower financial costs, and most importantly, have longer consumption terms up to 10 years. This choice also offers customized fulfillment options such as component bundling and guaranteed component pricing.
The different options mentioned are good ways to manage a company’s last time buy needs for obsolete components. There are pros and cons with each approach, but recognizing each individual company’s needs helps decide which option is better. When a last time buy decision has to be made, companies should always consider financing costs, consumption terms, and ways to preserve their capital in order to maintain and continue their business.