Obsolescence is a reality in today’s high-tech supply chain. Executive vice president of Flip Electronics, Jeff Ittel, explains how to put a stop to the stress associated with end of life notifications
Looking back on 30-plus years in the industry, it is interesting to reflect on just how much change has occurred. The industry was exciting during the early years of my career, but everything seemed so simple then. Semiconductors were primarily used for building computers and related products. Original equipment manufacturers typically designed, procured, and manufactured their products in one location.
Fast-forward to today and it looks like a completely different world. Semiconductors have become faster, smaller, and more complex at an ever- increasing pace. All of this has contributed to a much more complex supply chain. Today, semiconductors are pervasive in every aspect of our lives, in the smartphones, tablets, appliances, automobiles, and security systems that we use every day.
With semiconductor components just about everywhere we turn, semiconductor manufacturers constantly have to develop new chips to win new designs. This is particularly true in the fast-paced internet of things marketplace, where almost all products can include some type of semiconductor content.
The price of innovation Constant innovation also means that older parts are phased out of production to make way for newer devices. When an original component manufacturer decides to end- of-life a product or product line, a chain of events takes place. While this is usually a well-designed process from the OCM’s point of view, it can be a challenging one for everyone else involved in the supply chain.
Here’s a brief overview of how the EOL process works. Once the OCM has decided which products will be discontinued, and when, its sales team and distributors will communicate this to current users. Customers are notified of last order dates and last ship dates and must quickly work out how this affects their forecasts, revenue plans, product life cycle, and future support plans.
It is key to remember that many products have planned production and life cycles far longer than the individual components that go into the end-product. Component purchasers will therefore need to establish what inventories are on hand, including
all regions and contract manufacturing partners, looking at current demand and forecasts for all products that contain EOL components on the bill of materials.
They will also need to consider any future designs that may incorporate these parts and new product design plans in order to phase out products. There may well be commitments on other devices that go into these products that could create a financial impact, and there may also be an impact of inventory buildup from last time buys.