In Manufacturing — and in Life — You Need an Obsolescence Management Strategy

For the vast majority of families, the joy of having a newborn is quickly supplanted by anxiety about the future — with the most financially taxing task ahead being funding their undergraduate studies. With tuition rates set to skyrocket yet again in the coming years, parents have to establish a long-term strategy to fulfill that dream, one that can remain intact and undeterred regardless of the setbacks the years may present.

What is a new OEM product if not a newborn child, as least to those who commit a portion of their professional lives to seeing it fulfilled from conception to end-of-life? If completion of this life cycle is the equivalent waving goodbye to a child as they leave for freshman orientation, then those actively involved in a product’s supply chain should be just as committed as any forward-thinking parent. Below are just a couple ways managing your supply chain is no different than the challenges facing the average American family:

Overcoming Obsolescence and Supply Chain Disruptions

The only thing predictable about life is its unpredictability—and too often, that fact reveals itself at the most inopportune moments. Imagine that you rear end a vehicle in front of you after a sudden stop, or pipes below your sink spring a leak, or a tree falls over and caves in your new two-car garage. It’s virtually impossible to predict when we will be required to pay for these minor catastrophes — but regardless of our current financial situation, we almost always find a way to pay for the damages, because the consequences of the alternative are far worse.

For OEMs, that mindset is easily relatable to their methods of managing obsolescence in critical electronic components. OEMs find a way to acquire the inventory necessary to complete the life cycle of their products, regardless of cost, because choosing between a costly last time buy and costly product discontinuation is hardly a choice at all.

The modern supply chain is so intricate, so dependent on suppliers, distributors, contract manufacturers, and OEMs working seamlessly with one another that it’s virtually impossible to account for all the disruptions that may occur – but the secret to a successful obsolescence management strategy isn’t to prevent obsolescence, but to have a solution in place capable of overcoming it.

Working Capital Management

A family’s personal life, much like any company, is an exercise in maintaining working capital. Do you want to invest in a larger, newer vehicle more suited to accommodate a family of three? Do want to start preparing a down payment for a house with an extra bedroom? Working capital is what makes these standard of living improvements possible.

For OEMs, the situation is nearly identical. If they wish to ultimately expand or take additional steps to improve their standing in markets, they require working capital to do so.

The issue, of course, is how to maintain the necessary working capital to turn these dreams into realities when supply chain disruptions such as obsolescence consistently restrict OEMs’ growth potential. If short-term revenue must consistently be spent to achieve long-term profits, uncovering enough financial leeway to take your business to the next level might seem like a task of Sisyphean proportions (endlessly pushing a boulder up a hill only to have it roll back down again).

The Solution

There are a variety of options today designed to give families the flexibility to overcome unexpected disruptions without sacrificing their long-term dreams or their current standard of living. OEMs, on the other hand, have not been so lucky. What can a manufacturer do to ensure that their supply chain can support their metaphorical children while still maintaining both short-term and long-term goals?

An EDX Last Time Solution is a fantastic place to start.

With the ability to purchase last time buy inventory on an OEM’s behalf, our solution allows equipment manufacturers to preserve up to ten years of working capital. How much working capital is freed up depends on the size of the last time buy and the component cost; if $10 million is required to purchase the amount of inventory necessary for an additional seven years of product support, then that equates to exactly $10 million in working capital preserved. It really is that simple.

In fact, it’s even better than that, because with our industry-leading ability to securely store, package, and fulfill sensitive critical inventory anywhere in the world, the EDX Last Time Buy Solution has been proven to save customers an average of 42 percent in annual inventory carrying costs.

In Brief

Obsolescence is an issue none of us can predict with 100 percent certainty — but like any family that must find a way to carry on through the sudden and unexpected, so must the manufacturers that continue to push the limits of human ingenuity. Families push through to see their children graduate, OEMs push through to look back and reflect on their product’s contributions to society, and all the hardships both experience to reach the finish line are always, always worth it in the end.

When it comes down to it, there really isn’t much of a difference between the personal and professional, is there?

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