A strategic approach to obsolescence

Published:  13 April, 2021

While Industry 4.0 and IIoT promise a bright future, for many manufacturers it remains just that. In the here and now of the real world though, most manufacturers are only just beginning their digitisation journey. David Lenehan* explains how a strategic approach to obsolescence can help bridge the gap between the old world and the new

A recent report compiled by ERIKS UK & Ireland following research with the Institution of Engineering and Technology (IET), found that 50% of equipment used in 65% of factories is over 10 years old and that more than 70% have equipment with no spares availability, while 50% don’t know the lead time on spares for critical equipment.

Another recent global study by Vanson Bourne showed the majority of companies have experienced at least one unplanned downtime outage over the past three years, costing an average £192,000 ($260,000) an hour across all businesses. As well as estimating downtime losses to average £1.5m ($2m) per year for 82% of businesses, it also concluded that around 70% of companies lack full awareness of when their equipment is due for maintenance, upgrade or replacement.

The truth is all machinery is set to become obsolete at some point. It’s the nature of the physical world that things wear out in the end. But, most manufacturers live by the old analogy: why go to the puppy shop when there’s still life in the old dog? Yes, those bright-eyed, yappy IIoT and Industry 4.0 puppies will make great working dogs one day, but while there’s still life in the reliable old dog, many prefer to stick with what they know, so long as he can keep running.

The challenge though is to keep the old dog running, even possibly while you’re breaking-in and testing out the youngsters that will inevitable, one day replace him.

And so it goes for most manufacturers. In the same way as a good farmer will continue to care for his old dog while he trains up his new ones, so manufacturers can continue to get value from old kit, while gradually investing in new, so long as they give both the same levels of care and attention.

Even when kit is obsolete, it can still deliver great value, so long as you have a fully thought-through obsolescence strategy, to which you show the same level of attention as you do to your investment in new.

A good obsolescence strategy will ensure you get the maximum value from previous or new capital investments in terms of ongoing performance, performance improvement and energy efficiency.

Lifecycle

Step one in implementing an obsolescence strategy is to understand that parts and spares prices have a lifecycle. They start at a fair price, then as machinery starts to reach obsolescence, they rise dramatically as parts become hard to find but then later drop even more dramatically as original equipment starts to be replaced.

Small and medium businesses who cannot easily afford to overhaul capital equipment can, however, make use of falling prices and avoid disruption and downtime if legacy equipment is well maintained. The internet has opened up the spares market so companies can have a spares strategy that does not necessarily rely on the OEM.

Having an obsolescence strategy at the outset can help companies avoid buying spare parts at peak prices and avoid the costs of disruption from stress purchasing – e.g. when equipment has already broken down. So, planning ahead for the inevitable and stockpiling spares in a considered manner is the best solution to avoid higher outlays down the line.

Risk analysis

The “considered manner” referenced above though is crucial. It would be difficult to keep a storage of every single spare part you might ever need, so carrying out an Obsolescence Report and a Risk Analysis is a good first step toward developing a full strategy.

Risk planning is best carried out on a rolling timeline using an inclusive framework taking into account any factors that can contribute to the likelihood and potential impact of obsolescence. A usual starting point is simply to identify critical assets and then assess the risk of obsolescence in both qualitative and quantitative terms. Once the risks have been identified in relation to each asset, the next step is an assessment of obsolescence likelihood. Data for this can be gathered from everything from the maintenance logs and internal systems to the reliability of the supplier in terms of SLAs, service and support. By looking into suppliers’ end-of-line (EOL) plans, manufacturers can mitigate the risk of discontinued support or technology upgrades.

Strategy

Once you are aware of the risks, a strategy can be developed to minimise the overall obsolescence risk, divided into three parts: Repairs,

Upgrade and Spare Parts.

Repairs

Make an assessment of what can be repaired in the event of a breakdown. For items that cannot have any downtime whatsoever, a repair may not be an option as this is going to take a minimum of 24-48 hours, and that’s if the repair supplier has the components in stock needed to complete it. For items such as HMIs, where very specific overlays are required to complete the repair, lead times can push timescales into weeks rather than days, so repair for every item is not always an option.

Planning in advance for repairs with a trusted repairs and spare supplier is therefore a much better option than aiming to make repairs as a kneejerk to breakdowns.

Upgrade

Upgrading in the middle of unplanned downtime is never recommended so it is worth considering if the equipment can be upgraded in advance. What equipment can be upgraded? What equipment should be upgraded? When should it be upgraded? Simply having a plan answering these questions will help keep you ahead of the curve. Due to their rarity, the cost of some obsolete parts can actually be more than double the cost of a modern equivalent. New equipment though comes with warranty and is more readily available so you can be confident that you will receive ongoing support for a number of years.

Aside from these benefits, you can also get other benefits such as increased machine productivity, throughput and reliability. Upgrading can help reduce energy costs and therefore save more money. You should always consider these benefits as they can make the payback period on improvements seem really quick.

AC drives are often a prime candidate for upgrading as the majority of applications are relatively straightforward and require only minor wiring modifications. For more complex applications there can be a reluctance to upgrade in a breakdown situation. It is often easier to go like for like but this isn’t always the best option. A good supplier should have the necessary skills to assist or even set up the replacement before shipping. Planning the upgrade in advance is always the best solution.

Spare parts

What spare parts will be needed? Do we have them in stock? Keeping a good stock of the right spare parts can help mitigate the risk of breakdown disasters and expensive downtime. For items where you have ascertained that repair or upgrade is not an option, but the part is critical to your production, a spare should be kept in your stock, or held offsite with a trusted supplier on a subscription contract, so that in the event of a breakdown you can switch out the faulty unit in a matter of minutes. This mitigates downtime and gives you the option to repair the faulty unit and put it back into your stores, reducing future costs on spares management.

Buying spares at the right time can save you a lot of money compared to purchasing when you are already on breakdown and are factoring in express shipments from wherever the part is in the world, as well as the unit itself possibly being a lot more expensive due to its rarity now that it is obsolete.

In summary, a step-by-step obsolescence plan is essential to avoiding the terminal risks of downtime with legacy equipment, and is something you can integrate into your digitised systems as you upgrade over time.

*David Lenehan is managing director of Northern Industrial

For more information:

https://nicontrols.com/

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