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How to effectively manage obsolescence

23 October 2018 by Add Energy

Generally, the supply chain operates only one way - directing traffic of items into inventory and then into the hands of the user. Very few companies have put much thought into the processes for reversing the flow of removing obsolete items from the inventory and disposal. Yet this task is fundamental to effectively manage your spare parts.

Q: What is obsolescence?

A: Obsolescence is the significant decline in the competitiveness, usefulness, or value of an asset, tool or part. It generally occurs due to the availability of alternatives that perform better or are cheaper or both, or due to changes in user preferences, requirements, or styles.

Q: Why does this happen?

A: There are various reasons that equipment or parts can become obsolete, but it generally occurs as technology and equipment evolve. Led by market changes and environmental policies and restrictions, engineering tools and equipment is a rapidly evolving conveyor belt of new technology. As new generations of technology enter the market place, this renders the old one obsolete. An even more attractive prospect when much of these new technologies are often cheaper to produce than their predecessors.

Q: Does New Equipment Still Require Spares?

A: A dangerous misjudgment is that new equipment won’t require spares. Whilst you might consider brand new equipment as being without its problems, unfortunately, part failure upon start-up, is a common occurrence.

Being prepared with spares for commissioning of new equipment is vital in mitigating downtime during project start-ups that result in not just angry managers but high costs.

When operating new equipment, ensure a full review is completed ahead of commissioning to understand the parts in use, and provide you with the knowledge of any likely problems that may arise.

Failure to prepare is preparation to fail, and this is just as important when dealing with new equipment. 

Q: What impact does obsolescence have on businesses?

A: Obsolescence has a negative impact on business efficiencies and should be managed and avoided correctly to limit the pressure it applies to business functions. Often, obsolescent parts lead to a strain on project timings, which in turn leads to increased costs – both in downtime and recovery.

Q: What can I do to avoid these issues?

A: Be proactive. Processes, strategies, systems and reviews should be your friend, and not something to ignore and hope it goes away. Any procedure that addresses excess and obsolete spare parts in a proactive manner is a sign of an efficient and smooth spare parts management process. Having to write off inventory that has been purchased and then not used is an arduous task, but it is inevitable. So why not prepare for this? Not just in an accounting sense but through appropriate and proactive end-of-life inventory management.

Q: When should I start managing obsolescence?

A: Prepare yourself right from purchase. By being proactive in your management of spare parts obsolescence, it should begin right at the beginning of the spare parts management life cycle, not at the end when it’s too late. Plant and maintenance managers are often finding parts purchased at this ‘create and stock’ phase, still on the shelf years later, unused and no longer required. To address this, the initial stocking quantity decision-making needs to be considered. This means making effective and strategic stocking decisions based on a life-cycle perspective. By better understanding this, you will easily see if you are holding too many of that part and where adjustments can be made.

Q: What about when vendors stop supply?

A: Sometimes spare parts become obsolete due to vendors stopping the supply of them, even though the equipment that uses the parts is still in use. When these types of circumstances are out with your control, you need to consider your End-Of-Life (EOL) process. Like all spares management and strategies, the better and more refined the information, the better the EOL decision-making.

Q: What final sentiment would you give to obsolescence?

A: Identifying and removing obsolete spare parts is a good thing but it’s a reactive approach that doesn’t solve the real problem. A proactive approach to spare parts management is to admit that obsolescence is inevitable and work out how your organization can equip itself to deal with it.

 

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