What you’ll learn:
- Discover the hidden costs of obsolescence and its impact on supply-chain resilience.
- Learn how neglecting legacy systems can lead to customer dissatisfaction and lost revenue.
- Explore the concept of "obsolescence" and how it affects various industries.
- Understand the role of legacy equipment manufacturers (LEMs) in mitigating supply-chain risks and supporting legacy products.
You’ve probably heard the saying that a chain is only as strong as its weakest link. This little line of wisdom has been used to encourage collaboration and education in business and management, to motivate sports teams and groups of students in school, and in just about any situation that involves a group of people working together to achieve a common goal.
And as overused and overstated as this little saying might be, it couldn’t be more truthful than with supply chains. Like a real metal chain, supply chains involve networks of people and companies, all connected together to develop a particular product—and, for the purposes of the metaphor, the full chain.
The chain itself can’t exist without these smaller links, and if one little link fails or disintegrates, the whole thing becomes less resilient. As the chain gets older, more and more links will start to degrade to the point where the entire chain will fall apart if even a little stress is put on it. Anyone in supply-chain management has likely seen the results.
There are many causes of supply-chain disruptions. Some are large and obvious, like the pandemic that disrupted worldwide economies, but others, like component obsolescence, are far more insidious. Just like a real metal chain, supply chains age, and they can fall apart without anyone even realizing what’s happening.
This results in a supply chain that’s missing critical links—components that aren’t manufactured anymore, missing technical data, and a significant lack of capability to test old electronics. But what causes a supply chain to degrade in the first place? What has caused those links to go missing?
Obsolescence: The Slow Apocalypse of Electronics Manufacturing
A longstanding concept in supply-chain management, especially in electronics manufacturing, has been “obsolescence.” Application OEMs and end-users are finding that the electronic components needed to make their products or keep their products functional are becoming obsolete.
This can be a challenge for many that require long-term support, such as defense and even consumer automotive applications (see figure). The OEM no longer produces or supports the component's production, no secondary suppliers are available, and trying to manufacture the component is nearly impossible because the supply chain has broken down.
The Merriam Webster dictionary defines obsolescence as “the condition of no longer being used or useful,” but who defines what is still useful? In fact, OEMs routinely discontinue parts that are still useful to customers.
Therefore, a new definition of obsolescence has emerged: Obsolete items are those discontinued by their OEM.
Any industry that depends on electronics technology—which these days is just about every industry—is affected by obsolescence. For many types of companies, the impact is manageable, and solutions are feasible. However, for some companies, especially those that make capital equipment with very long lifecycles, the impact can be apocalyptic.
But why electronics specifically? Because electronics technology is the fastest-growing and most rapidly changing industry today. New semiconductor technology (smaller, faster, cheaper) relentlessly improves every few years.
Within two years, a state-of-the-art device was old news. Products are constantly updated, older models are cast aside, and new technologies are developed to replace old ones. The links in the chain start to degrade as the various people who contributed to the product move on to other designs to keep up with the exponential growth of technology.
Application OEMs and end-users find themselves unable to purchase new or replacement components for their legacy systems—electronics systems that are obsolete but still absolutely critical. This is driven by electronics component obsolescence that forces embedded OEMs to abandon old designs to maintain their relevance in the industry.
This isn’t a picture of what will happen in the future. This is happening now worldwide in any industry that depends on technology for support.
Enter the Legacy Equipment Manufacturer
GDCA Inc. may have pioneered the idea of legacy equipment manufacturing in the 1990s. Still, the idea of having an outside company provide manufacturing support for legacy equipment has been around for much longer.
Legacy equipment manufacturers (LEMs) are incredibly similar to OEMs on the surface for all intents and purposes. Both have manufacturing and engineering teams, sales and customer support, supplier relationships, and inventory control. However, LEMs are set up to do something entirely different. They don’t make new products, but rather support existing products. In electronics, this often comes in the form of manufacturing embedded circuit boards that embedded OEMs have discontinued and no longer support.
As technology advances at a faster pace each year, the various gaps in the supply chain are greatly exacerbated. LEMs fill those gaps to meet the continued and low demand for legacy equipment. They’re designed to be a shock absorber between embedded OEMs and application OEMs, buggering the differing durations of their respective product lifecycles.
An LEM works closely with the embedded OEM to consolidate the technical data necessary to rebuild not just the product, but the entire supply chain for the product from start to finish. This, in turn, enables LEMs to deliver obsolete designs that are form, fit, and functionally the same as the original—identical products from a different source.
The advantages of bringing an LEM into your supply chain will be explored in future articles with more detail, but to summarize here:
- LEMs help OEMs achieve supply-chain resilience, especially for legacy products.
- LEMs provide critical electronics components and assemblies beyond the point of discontinuation and for as long as they’re required by the customer.
- LEMs reduce the cost and risk of sustaining legacy products.
However, to incorporate legacy equipment manufacturing into a product's lifecycle, we first must change our perspective on obsolescence and supply-chain risk management. This means recognizing obsolescence not as something in the future that can be dealt with later, but a challenge that can be tackled proactively. It’s much easier to protect a metal chain from rust than it is to try and fix the chain after several links have rusted through.
Rather than view obsolescence as a distant obstacle in the future, reframe this challenge as a major problem for supply-chain resilience right now—and a problem that can be dealt with through collaboration and proactive management.
