Introduction to obsolescence management
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Managing obsolescence is increasingly becoming a key business process requiring organizational buy in and cross-functional support which can often include the end user or customer.
What is Obsolescence?
Obsolescence frequently occurs because either:
- Raw materials become unavailable
- New products come out which are superior in some or more aspects and replace pre-existing parts.
Whilst obsolescence is preceded by declines in popularity it can also be facilitated by new technology and manufacturing practices that create new products or redesign old ones. Obsolescence can occur at various stages within a bill of material – for example a PCB component may become obsolete (and replaced) in a radio – this does not render the radio obsolete merely the component part.
Robust management and processes are critical especially with consumer demand for sustainability and products with increased life cycles. But how should companies manage obsolescence? Typically organizations will appoint an obsolescence management team.
The role of team is to develop and deploy processes which facilitate the prediction of materials and equipment obsolescence and develop mitigation plans that minimize cost increases and schedule challenges.
- Obsolescence Management boils down to three core activities
Reduce likelihood of future occurrences
Awareness of possible issues
Mitigation of issues
This will often involve the development of a database that contains parts and can be used to track obsolescence issues. Additions to the database are typically triggered by the issuing of obsolescence notices from suppliers – the database can then be used to track notices against parts and ensure that corresponding action is taking place.
There are inherent problems in relying on suppliers and manufacturers to send notices in a timely fashion coupled with issues in identifying users to send notices too in the first place (many organizations will offer obsolescence notices as a subscription service). The obsolescence management team must make sure the data gets sent to the right person within the organization as notices can easily be misdirected.
Obsolescence management centers around a control database. Most companies have commodity managers or system experts who are knowledgeable about (and often have responsibility for the management of) material commodities such as electronics. Utilizing the obsolescence database and the knowledge of the commodity expert individual component parts can be tracked issues can be captured codified then prioritized in terms of criticality.
Many businesses conduct regular reviews of their parts master / parts list to review possible obsolescence issues. This regular health check encourages confidence prior to manufacture and where issues emerge, the design team can review the options available based on feedback from the Obsolescence management team.
Summary
Obsolescence management is a key activity and one that requires resources and tools. Whilst often overlooked it can be of such criticality that a failure to identify obsolescence issues can bring manufacturing processes to a standstill or see costs skyrocket.
Managing suppliers in a robust way that delivers tangible and measurable benefits to an organization requires various supporting policies and processes. These include the process of supplier evaluation. But what is supplier evaluation? And why, if your not doing already, should your business look to implement it?
My business requires our suppliers to be certified – isn’t that supplier appraisal?
Many businesses use initial selection criteria when sourcing suppliers. This criteria can range from whether the supplier holds externally verified certificates (i.e. BS EN ISO) through to the size of volume of spend vs supplier turnover and increasingly in the world of corporate responsibility whether the supplier has appropriate social and environmental policies.
Using this form of selection criteria can offer companies a screening process which can ensure that appropriate suppliers are selected for RFP and product competitions. The selection criteria ensures that selected suppliers meet or comply with standards. However merely evaluating suppliers based on certificates held is not true supplier appraisal.
True appraisal can be defined as assessment of the proposed supplier and their capability of managing the supply requirement – this will typically include four factors
Quality
Price
Service
Delivery
The supplier appraisal will typically take the form of an assessment or “score carding”. Criteria or rating requirements are established that can be combined into an overall score which can then be analyzed objectively against other suppliers.
Why should you evaluate suppliers?
Supplier appraisal is a helpful tool in de-risking the supply chain. If the supply of product fails, the buying organization may face serious consequences. Selecting the right supplier is a critical step in the purchasing process. Carrying out pre-contract appraisals should be considered good practice that helps to mitigate against continuity failures within the supply network.
Supplier appraisals are not just for the pre-contract phase however and can be used as part of ongoing supplier management and development strategies.
Benefits of using Supplier appraisals post contract award
There are various benefits to utilizing appraisal post contract award – these include ensuring the supplier retains the capacity and capability for supply. Another prominent reason to use post-contract supplier appraisal is to continually monitor performance (cost, quality and delivery) identifying any performance issues that may exist. Supplier evaluation/appraisal should be considered an essential tool in performance and cost management.
What should be measured in a supplier evaluation?
As stated, typically most organizations will focus on four main critiera in pre contract assessments these are
Cost
Quality
Delivery
Service.
In light of recent developments regarding corporate responsibility this may be appended with sustainability/Green buyingrequirements.
For pre-contract appraisal this may be further appended through adding
Performance
Capability (in line with any expansion requirements).
The weighting of each element may vary from industry to industry and company to company and indeed product to product. In some organization e.g. Pharmaceuticals quality is likely to be of optimum importance. In FMCG where quality and delivery are considered a given – cost may become a priority.
Building a model on which to appraise suppliers?
Luckily supplier appraisals don’t have to be over complicated however they require some thought and communication. The first step is to define your assessment criteria. The criteria should be communicated to the supplier (which must clearly understand requirements and how measurements will be made) an audit carried out and assessments made. For post contract appraisal this may mean regular ongoing assessments.
Summary
Supplier appraisal and evaluation is a key tool, which can be utilized both in the pre-contract phase in selecting supplies to source from and also in the post-contract phase in assessing performance.
The model used in the assessment is just that a tool that can be adapted for each organization and one that pays particular attention to their key business drivers. By placing close attention to supplier selection you are far more likely to manage the total cost of the transaction (not just the initial purchase price!).
Finally – post contract supplier evaluation activities are fantastic for improving communication between suppliers and buyers and represent and ideal opportunity to seek out and deploy improvement initiatives.