Obsolescence Risk Assessment Process is a critical activity for effective management of Obsolescence and deciding suitable Mitigation Strategy. Though there are various standards such as JSP-886, IEC-62402 etc; which define how to manage obsolescence, yet none of them specifically say any thing about a process for Obsolescence Risk management that can be applied by organizations. Here in this post, we will discuss a suitable Obsolescence Management process and its associated activities that has been designed based on years of experience.
What is Obsolescence Risk Assessment
The entire process of identification, analytics and evaluation of risk severity to the equipment by the obsolescence is known as Obsolescence Risk Assessment. Post evaluation of risk severity, it will be easy to decide suitable Obsolescence resolution option.
Obsolescence Risk Assessment helps in managing obsolescence in a proactive and cost effective manner. The ideal methodology to conduct Obsolescence Risk Management should be using cost, impact and probability to determine the risk category i.e. Low, Medium or High.
An exhaustive analysis should be carried out for High Risk Components in order to identify the best available Obsolescence resolution option. However, if the component is having low risk, then a reactive approach should be taken to mitigate the obsolescence. Proactive approach for low risk components is not cost and time effective and hence not suitable.
Important Features to Analyze in BoM During Risk Assessment
The important features that should be analyzed for each part/ item of Bill of Material (BoM) while carrying out Obsolescence Risk Assessment are: –
- Available Manufacturers
- Supportability in Years
- Availability of Stock
- Rate of Consumption
- Item Criticality w.r.t Equipment
Obsolescence Risk Assessment Process
The obsolescence Risk Management process can be divided into seven stages. They are:
- Stage 1 – System Support Plan
- Stage 2 – Extraction and Filtering of BoM
- Stage 3 – Risk Analysis and Evaluation for Each Component
- Stage 4 – Risk Prioritization
- Stage 5 – Risk Mitigation Strategy
- Stage 6 – Obsolescence Risk Table
- Stage 7 – Periodic Review
Stage 1 – System Support Plan
In this stage, time duration for which the components in BoM need supportability is identified. The various factors meriting consideration while formulating supportability duration are supportability as per contract, mid life upgrades and likely modification/ replacement of sub-systems during mid life upgrades.
Stage 2 – Extraction and Filtering of BoM
It is recommended that the Extraction of BoM should be on component level as most of the obsolescence issues are observed on this level only. Once the BoM is extracted on component level, the Original Equipment Manufacturer (OEM) may exclude mechanical parts and low risk components such as components having open architecture, standard design and supportability for more than 5 years.
The exclusion of Low risk components will save time and reduce the unnecessary effort of carrying out detailed analysis for each and every component. Post exclusion, The OEM should run this data through an Obsolescence Monitoring Tool to identify the components with obsolescence risk.
There are various Obsolescence Monitoring Tools available online such as EDX BOM Monitoring Solution, Silicon Expert’s Part Search tool, 4D Online BoM manager, etc.
Stage 3 – Risk Analysis and Evaluation for each Component
The Risk Analysis for each component should be based on: –
- Obsolescence Probability
- Operational Impact Severity
The criteria for assigning risk factor should be based on below mentioned table: –
Table – Criteria For Assigning Risk Factor
Stage 4 – Risk Prioritization
When the ‘ Supportability Duration or Number of Available Manufacturers’ is compared with ‘Availability of Stock Vs Rate of Consumption’, it gives us the probability factor by which obsolescence is likely to happen.
The probability is then further pooled with Operational Impact Severity to obtain Risk of Obsolescence for the component using the following Matrix.
Stage 5 – Risk Mitigation Strategy
Once the above task is completed for all components of the BoM (excluding low risk components), then they can be arranged in the descending order of the Risk level. Accordingly, the entire component list can be segregated into following w.r.t their Risk levels:-
- Components with Very High Risk of Obsolescence
- Components with High Risk of Obsolescence
- Components with Medium Risk of Obsolescence
- Components with Low Risk of Obsolescence
Risk Mitigation Strategy for Components with Very High Risk of Obsolescence
Maximum focus should go on mitigation strategy for these components. The mitigation strategy should be based on cost, impact and probability. Some of the (but not limited to) suitable Risk Mitigation Strategies are –
- Minor/ Major Re-design
- Technology Transparency
- Supply Agreements
- Life Time Buy
- Life of Type Buy
- Planned System Upgrades
Risk Mitigation Strategy for Components with High Risk of Obsolescence
The effort level for mitigation strategy is lower than the above components. However, if the time and resource permits, similar focus may be given to deal with such obsolescence too.
Risk Mitigation Strategy for Components with Medium Risk of Obsolescence
No immediate action is required for such components. However such components needs attentive monitoring.
Risk Mitigation Strategy for Components with Low Risk of Obsolescence
A reactive approach should be taken to mitigate obsolescence of such components. Proactive approach for low risk components is not cost and time effective and hence not suitable.
Stage 6 – Obsolescence Risk Table
Once the Risk Mitigation Strategy is finalized and priority decided, these conclusions are required to be documented and implemented. Accordingly an Obsolescence Risk Watch Table may be formulated for documenting the conclusions and corrective actions.
Stage 7 – Periodic Review
The conclusions are required to be reviewed and updated on periodic basis. The period of review may be taken as convenient but our recommendation is on yearly or two yearly basis.