Episode 7 - Reactive & proactive Obsolescence Management

Last newsletter I wrote about sourcing of standard & purchase parts, some examples were given.

Now let's talk about how and when the master data should be updated.

When creating master data for standard and purchase parts, the manufacturer, article numbers and the manufacturer himself, among others, are created in the ERP system. These features can be used to identify and purchase the parts.

What happens to the master data over time?

Here are some examples:

1. Manufacturers change the designations or article numbers internally!
2. Manufacturers change the nature of the previously created part!
3. Manufacturers stop producing the previously created part!
4. Standards or certificates are subject to change!
5. Etc....

How should such eventualities be dealt with in master data maintenance?

That's what reactive and proactive obsolescence management is for.

What is Reactive Obsolescence Management?

The term "Reactive Obsolescence Management" refers to the management and management of obsolescence in purchase parts, especially in an industrial context. Obsolescence refers to the condition in which a product or component is obsolete and may no longer be available or functional.

Reactive obsolescence management is about responding to obsolescence that has already occurred and taking steps to minimize its impact. Here are some aspects that are considered in reactive obsolescence management:

1. Obsolescence identification: Capture and identification of parts or components that are obsolete. This may happen due to product discontinuations, technological advances, changes in environmental regulations, or other factors. In many cases, the obsolescence usually only becomes visible when the previously created part is ordered, i.e. the previously created part is to be ordered to replace the defective spare part that is not available in stock. The purchasing department orders the requested part and receives information from the manufacturer that the part is no longer in production or that the successor may not be 100% replaceable. Now, reactive obsolescence management includes the identification of the successor, master data must be collected about it, the responsible departments must check to what extent the new part can be used. The master data must be changed and, in many cases, the technical documents.
2. Documentation and communication: Effective documentation of obsolescence information as well as communication with relevant systems are crucial to enable an efficient response to obsolescence issues.

These steps must now be completed as quickly as possible, while in the worst-case production comes to a down time. This results in enormous costs for the manufacturer.

Reactive obsolescence management is often a short-term measure to solve problems that have already occurred. Ideally, however, there should also be a proactive obsolescence management system that aims to identify obsolescence risks at an early stage and develop long-term strategies to avoid or minimize them.

What is Proactive Obsolescence Management?

Proactive obsolescence management refers to the systematic and forward-looking approach to managing obsolescence in purchase parts. In contrast to reactive obsolescence management, which focuses on managing obsolescence that has already occurred, proactive management aims to identify and assess obsolescence risks at an early stage and to develop long-term strategies to avoid or minimize them.

Here are some key elements of proactive obsolescence management:

1. Early detection: Continuously monitor developments in technology, markets, regulations, and other relevant areas to detect early signs of obsolescence risks.
2. Risk assessment: Systematic assessment of potential obsolescence risks for purchase parts. This may include analysis of product lifecycles, technological developments, regulatory requirements, and other factors.
3. Alternative solutions: Develop strategies and plans for dealing with potential obsolescence, including identifying alternative solutions when certain parts or components become obsolete.
4. Supplier management: Maintain strong relationships with suppliers and monitor information on product lifecycles, planned product discontinuations (PDN), and technological advancements (PCN).
5. Sustainability aspects: Consideration of environmental aspects and sustainable solutions in the selection of materials and technologies to ensure that products are available for a longer period of time.
6. Communication: Transparent communication with internal departments, stakeholders and suppliers to share all relevant information about obsolescence risks and work out solutions together.

PDN =Product Discontinuation Notification is a formal communication sent by a company to inform customers and stakeholders about the discontinuation or end-of-life of a specific product. It typically includes details such as the reason for discontinuation, a timeline for product availability, and instructions on how customers can transition to alternative products or solutions. This notification aims to manage customer expectations, minimize disruptions, and facilitate a smooth transition for affected parties.

PCN =Product Change Notification is a formal document issued by a manufacturer to notify customers and stakeholders about upcoming changes in a product's design, manufacturing process, or other key attributes. PCNs typically provide details on the nature of the change, the reasons behind it, and any potential impact on the product's performance or availability. The purpose of a PCN is to keep customers informed, allow for necessary adjustments, and maintain transparency in the supply chain.

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Proactive obsolescence management helps organizations better prepare for future challenges, use resources more efficiently, and minimize downtime due to obsolete parts. It supports long-term planning and helps improve resilience to unforeseen changes in the procurement and availability of parts.

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Simple example of a workflow for proactive obsolescence management:

It is crucial to see the long-term benefits of proactive obsolescence management in the context of total cost of ownership and risk mitigation. Production downtime due to obsolescence can cause significant financial losses, reputational damage, and customer dissatisfaction. Therefore, the cost of proactive measures may be justified compared to the potential cost of production shutdowns. A careful cost-benefit analysis is important to determine the most cost-effective strategy for each company.

The decision to manage obsolescence internally or to use a professional company with experts depends on numerous factors and the specific needs of the organization.

Benefits using a Professional Company with Obsolescence Experts:

• Specialized expertise: External obsolescence management companies often bring specialized expertise, own tools and experience, which can be valuable for identifying risks, implementing best practices, and staying updated on industry trends.
• Network and resources: Professional companies may have a broader network and access to resources, including information on alternative components, suppliers, and industry insights, which can enhance the effectiveness of obsolescence management.
• Efficiency and focus: Outsourcing obsolescence management allows the organization to focus on its core competencies while leveraging the efficiency and expertise of external specialists, potentially leading to more streamlined processes.
• Faster and cheaper: Outsourcing obsolescence management is often faster & cheaper vs. managing it internally. External companies, specialized to these topics have often own tools to evaluate manufacturers data, they are often familiar working with Big Data and can solve complicated topics thru their experience.

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The optimal choice may depend on factors such as the organization's size, complexity, available resources, and the critical nature of the products involved. Some organizations may prefer to maintain internal control. Others may find value in outsourcing to professionals who can bring a fresh perspective, industry-wide knowledge, and efficiency to the obsolescence management process. It's essential to carefully weigh the pros and cons based on the unique circumstances of the organization.

Hint: Keep your master data accurate and up-to-date so that proactive obsolescence management prevents reactive obsolescence management! Calculated costs are always cheaper than uncalculated costs.

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The written article is based on my personal experiences and my individual selection. It makes no claim to completeness. If something is incorrect, I kindly request information or feedback.

best wishes

Sascha Hartung