With automation on the rise, new innovations and health regulations regularly being introduced across all industries, it can be difficult to handle obsolescence and the tension and pressure that comes with it.
Previously, machinery was designed to last decades. But now, with so many rapid technological changes, the desirability and functions of more and more assets are no longer needed. If an item is no longer available from the manufacturer, or not suitable for current demands as mentioned above, it causes obsolescence.
This is inevitable and often leads to high expenses for replacements, requalification and repairs, which, if handled poorly, can affect your market edge.
Obsolescence is hard to manage because it's unpredictable. To handle it well, you need a consistently monitored management process that can safeguard you from a delayed response and mitigate any negative consequences.
How do you create a process that is as efficient as possible? David Khanna, Operations Director at Arolite, explains further.
Detailed knowledge
A detailed knowledge and database of all units in your legacy estate is crucial. It’s the first step, enabling you to easily analyse the implications of any changes to your assets which, if left unorganised, can open your business to a crisis.
For example, there could be a significant number of units that are no longer useable or need to be replaced as soon as possible, and you need an easily accessible way of identifying them. Without a database, you’re not going to be able to handle this efficiently without wasting time that you could have easily saved.
Example: F-GAS regulations
In the commercial kitchen industry, F-GAS regulations, which are put into place with the intention of limiting the damage of harmful gases to the Earth’s atmosphere, changed recently. The new law means that companies that use traditional refrigerants that have a Global Warming Potential (GWP) greater than 2500 will be affected; as of 1 January 2020, they will stop being sold and serviced.
Although it will directly affect the equipment and gas manufacturers, it will also have a domino effect on the businesses that use the refrigerants. They will need a database that will allow them to work out which items they need to replace.
They will also need a deep knowledge and need to seek advice on how to understand the implications that these new regulations will bring to their business. This may include gradually changing the assets so it doesn’t affect business processes, along with the best way to reduce any costs.
Stay aware of your industry
Obsolescence is often about being reactive to changes in the industry, but you can make the steps to be as proactive as possible through learning. If you don’t want to fall behind your competitors and the industry, you need to be forward-thinking and monitor the environment that you are operating in.
In the case of the example above, if you failed to learn as much as possible about the F-GAS changes before they come into effect, you’re already starting on the back foot. You’re only doing yourself a favour by being proactive now, to avoid any headaches later.
After you have created the database, it needs to be accompanied by industry data and expert knowledge on past, present and future conditions to support you with the best steps to take. Stay aware of the state of the industry from many different environments. You can also seek support from external consultants who can offer advice and solutions for the entire obsolescence process and possess the skills to support on an ongoing management plan.
PESTLE
Keeping an eye out on ‘many different environments’ can be a minefield. How do you keep tabs on every single element of your business? Consider using the PESTLE technique (Political, Economic, Social, Technology, Legal and Environmental).
This offers an easy to follow guideline for you to make sure that your business is staying on top of current affairs, not just from a finance or technology perspective, but also from a corporate social responsibility perspective and ensure you’re up to date with all the latest legal requirements. Ultimately, this can help to make sure you are not hit by any nasty surprises.
If we take technological obsolescence for example, it happens at such a fast rate that it’s hard to keep up. By adapting the PESTLE technique to your learning, you can essentially have a bird's eye view on the environment, and recognise any potential new technologies that are available to you, and which have a high risk of becoming obsolete or are already fading out.
Assess and adapt
Risk assessments happen across all business processes, but an obsolescence risk assessment register will help you to identify the period when each asset is needed and how long your supplies will generally be available for. It is crucial for industrial obsolescence management.
Use a rolling timeline and list any factor that may mean something is more or less likely to become obsolete. You can see your weak points best by doing this. When you then match the risks from your earlier research and identify them in relation to each asset, it’s much easier to analyse and make suggestions and assumptions.
What is the likelihood of a part breaking down? What about the chances of an asset becoming discontinued? What is that specific component’s average lifespan? These are all questions you should be including in the risk register so you can plan and budget accordingly.
Procurement strategy
Once your risk assessment is ready and you’ve analysed your weak points, you can then decide on a strategy. Identify the items with the highest risk of obsolescence according to probability and the impact that it would have on your business. Do you need to purchase spares?
Your knowledge bank with valuable notes and analytics will help this strategy and give weight to ideas and suggestions of what will become obsolete, so you can act on it before it happens. You can then prioritise assets by acting on those which have the highest risk of obsolescence. Regularly check on items for a forecasted period of time which have a medium to low risk, to make sure you don’t fall behind.
A lack of understanding of obsolescence and the importance of it can have a major impact on your business. Everything has a lifecycle and obsolescence is inevitable, so planning effectively is essential for cost-effectiveness, time-sensitivity and achieving the edge. Obsolescence management doesn’t have to be unmanageable, it just takes dedication and strategy. Fail to plan, plan to fail. It’s as simple as that.
