If your company just received a product change notification (PCN) for a critical electronic component or semiconductor, the first thing you should do is consider yourself one of the lucky ones.
Of all the electronic components that transition toward obsolescence, roughly half are issued without any prior notice. While component manufactures do strive to keep their OEM customers informed of any potential disruptions, there is no industry standard that dictates when — of even if — a component manufacturer should issue a PCN. As a result, a PCN can be issued months or just weeks in advance; in some cases, PCNs are issued with an immediate last time buy date. In a market that is already struggling with on-hand working capital deficiencies brought on by near-historical inventory shortages, asking a global supply chain to pivot away from established channels in a matter of days or weeks is simply not realistic.
But faced with the prospect of implementing an alternate strategy in the face of a PCN with a somewhat realistic last time buy date, an OEM’s options are still somewhat limited. An OEM can either enter into the third-party market, redesign the product from the ground-up, or, should no other option be feasible, discontinue the product altogether. Each option comes with its own costs and supply-chain related risks — and often these costs and risks far outweigh any benefit they might have in regards to business continuity.
For example, while the third-party market is capable of providing necessary obsoleted inventory, going through unauthorized channels significantly increases the risk of counterfeit components. In 2018 alone, counterfeit components were responsible for $8 billion in electronic component and semiconductor sales — a trend that worsens as shortages and extended lead times become more prevalent. Even with the most stringent commitments to transparency and traceability in place, immediate last time buy dates often force OEMs to make quick decisions that may not necessarily adhere to those commitments. Depending on the industry, the fallout could be devastating. A counterfeit circuit board within tanks or pieces of military equipment, for example, could not only represent billions of dollars in losses, but directly puts the lives of men and women in danger.
And this scenario is still considered the most cost-effective option compared to the other two. A product redesign is not only costly, but depending on the industry could take years to be approved under federal regulations. Healthcare equipment is a good example of this, where the slightest alteration to an MRI scanner or similar tool must be approved by the FDA — a process that could take a year or longer. The third option, product discontinuation, is less of a strategy and more of a worst-case scenario that could potentially erode decades of consumer trust and goodwill in an instant.
A Partstat Last Time Buy Solution is a new option for OEMs who face the dilemma of moving forward past an unexpected PCN. Instead of considering the consequences of each of these decisions, the Last Time Buy Solution eliminates all concerns typically associated with the last time buy process. Using our own capital, we purchase all of the inventory required to maintain the integrity of your supply chain directly from the component manufacturer. This way, not only is the OEM’s working capital preserved to be dispersed toward other initiatives, but it eliminates any concern associated with trace-ability or counterfeit components.
But even if the OEM does commit to purchasing all of the inventory necessary to complete their product’s lifecycle, not every OEM is capable of securely storing such a large quantity of inventory on-site for an extended length of time. To address this concern, Partstat stores the inventory in our own ISO-certified facilities under the care of our trained staff of supply chain specialists. When the inventory is needed, we will even deliver it anywhere in the world based on a schedule personalized to fit the customer’s needs.
Receiving a PCN, if received at all, used to be the first of many steps toward securing your supply chain. Partstat has managed to reduce those steps down to one: Contact Partstat.