GDCA Newsletter : July 2017

I often get asked, “If GDCA can make money supporting discontinued products, why can’t board OEMs?” It is a good question.

Sustaining old designs is a completely different business than introducing new designs. This reality drives board original equipment manufacturers (OEMs) to discontinue their products—even in the face of ongoing customer demand. Why would they do that?

Board OEMs typically discontinue their commercial COTS boards because component obsolescence issues complicate production, or because customer demand has fallen off so much that they lose money if they continue support.

To remain financially viable, board OEMs routinely offer last-time buys (LTBs) and pre-stocking agreements, but these solutions aren’t enough for some customers. These are the same customers who later return requesting “just one more order.” If they can, board OEMs will accommodate these requests, and they often lose money when they do.

Estimating that manufacturers spend at least 25 percent of their indirect costs on their bottom 4 percent of product sales is conservative. Special orders of discontinued boards are a large portion of low-value products. Even raising prices to cover increased costs is not good business, because it is still a lot of trouble for a small portion of overall revenue targets.

Anyone who’s been involved in delivering a discontinued product order knows that the work gets harder as product designs get older. At best it is a chore; at worst it is a nightmare. Board OEMs can’t indefinitely support every product they ever introduced.

Ethan Plotkin, CEO

Knowing the Difference Between a Legacy Equipment Manufacturer (LEM) vs. an OEM
Saves You Time and Money

When you need an embedded board that is still in production, it is easy to call the OEM, order what you want, and receive delivery. Because everything needed to produce your product is still readily available, you don’t have to worry about issues like accessibility, documentation, or counterfeit parts. However, after the point when an OEM is forced to turn its resources toward newer products (and their future!), and their older, more difficult-to-support products are discontinued, everything about manufacturing and supporting these products changes, and a different proactive approach is needed.

Dealing with the sustainment of a discontinued or older embedded board product requires understanding the distinction between original equipment manufacturing and legacy equipment manufacturing. Although legacy equipment manufacturing sustains products by utilizing the original IP, the processes and organization needed to manufacture and support these products is vastly different than the ones the OEM uses.

Supporting applications with decade-long lifespans requires a basic shift in the manufacturing approach. How long past End-of-Life (EOL) is that component? Where are the holes in the technical data package (TDP)? How much traceability is left on the board? Competing priorities? Profit margins? Resource allocation? Availability? Sourcing? Lead times? This is legacy equipment manufacturing. Nothing is the same, there are no one size fits all solutions, and everything is different.

It is easy to take for granted the ease of availability when working directly with board OEMs. However, once the OEM issues EOL notices, and the parts you need are no longer being manufactured, planning upkeep for the remaining life of your system can only be achieved with a different mindset that embraces a different approach.

It is important to be fully aware that a different set of rules apply when manufacturing boards in the active phase of their lifecycle versus boards that are experiencing component obsolescence or have been already discontinued by their OEM.

Understanding these differences is vital for the sustainability of your systems.

See What You Missed

Bloomberg Supply Chain Risk Management: Protecting Critical Technologies

GDCA’s CEO Ethan Plotkin joined Harvey Rishikof, Jim Kelly, and more on Bloomberg Government’s panel to discuss industry colleagues and to address the growing issue of supply chain risk.

Watch Video

Embedded World

This past March, GDCA attended Embedded World in Germany for another exciting look at the new advancement in Embedded Technology hitting the industry. As the conversation shifts around obsolescence and Lifecycle Optimization, we will continue to have productive and action-filled discussions with OEMs, regarding obsolescence and managing customer demand for discontinued products. Read More »

DMSMS

GDCA was once again Pen sponsors of the DMSMS/DMC conference in Denver. We were excited to forge new relationships with the government and to advise them on how to work better with the industry. We’re looking forward to continuing the conversation through work groups and allied industry partners to revamp proactive obsolescence risk management. We kept hearing questions like, “How do we make this work?” We welcome your feedback and look forward to conversing with you at this year’s conference.

DAU

CEO Ethan Plotkin co-chaired a DMSMS workshop with Robin Brown at the DAU Hot Topic Forum. The forum is a learning portal for the DoD Acquisition Workforce. The forum was a collaboration to create a better understanding of how the industry and the government can partner to resolve the conflicts of DMSMS management. The attendees asked how they can design a better structure that allows obsolescence to be manageable and cater to sustainment.

AIA

Boeing Commercial Airplanes hosted the AIA spring meeting in Seattle. The conference included a diverse group of companies and government prime manufacturers that meet regularly to improve and to strengthen the supply chain for the aerospace and defense industries.

If brought in early enough, We could have kept even these planes in the air.

Snapshot from AIA: Take a look at the Italian Caproni, considered the first fighter plane ever designed. In its time this plane was a state-of-the-art aircraft, ahead of the curve in design and weaponry. Unlike other museum artifacts, it hasn’t been restored and is almost identical to the original fabrication.

Electronica

GDCA attended Electronica conference in Germany for the first time. Our key take-away was that the solution for cyber security will rely on the network being more adept at identifying and isolating compromised devices. The concept of embedding different levels of security at the system and function level (different levels of trust for toasters versus car windows, navigation, and control systems) will be key to keeping our systems secure.

Supply Chain Risk Management

This year we discussed how to apply the Supply Chain Risk Management process principles (identify, assess, mitigate, and manage) to figure out how the DoD and industry can better plan for sustainment during the Acquisition phase. Each break-out group recommended proactive sustainment policies and practices for common types of DoD parts and systems, which will culminate in an industry white paper.

Upcoming Events

• September 13th-15th
  LifeCycle Industry Days (LCID)
  Dayton, Ohio
• September 26th-28th
  AIA Supplier Management Council
  Hilton Head, South Carolina
• November 13th-16th
  Electronica
  Munich, Germany
• December 4th-7th
  DMSMS
  Tampa, Florida