In recent years, as companies have become leaner and try to do more with less, there has been less specialization in purchasing. Buyers at many companies are responsible for sourcing and managing multiple commodities. However, over the last 10 years or so, more buyers are specializing in end-of-life (EOL) or obsolete parts. Many large OEMs and EMS providers have last-time buy (LTB) purchasers who are responsible for managing EOL parts.
OEMs and the last-time buy purchasing title didn’t use to exist 10 years ago. The CEO of an electronics distributor who sells EOL parts and other components recently said, “big infrastructure guys like General Electric and Motorola have LTB buyers in-house”.
“Those companies build equipment for 911 call centers and cell towers that last 20 years,” he explained. Many of the parts in those systems will become obsolete five years after they are built.
Other electronics companies that build communications equipment and defense and aerospace and industrial systems also have long product lifecycles and, as a result, have LTB purchasers. Defense and aerospace OEMs design and build sophisticated systems that can take years to complete. Many of the parts used in those systems become obsolete even before the systems are put to use in the field—and they often will have to be supported for 10 or more years.
LTB purchasers monitor which parts are about to go EOL and forecast how many of the components their companies will need once a last time buy notice is issued by the component manufacturer. That is no easy task, because forecasting the demand for a part 10 or 20 years in the future is a tall order—even if the design of the system does not change during those years, which is unlikely.
There is serious financial risk in last-time buys. If the purchaser orders too many parts, his company may end up with a large inventory of obsolete parts that may have to be liquidated for pennies on the dollar. If too few components are ordered, company purchasers in the future may have to find alternate sources or parts—or perhaps buy them on the open market, where there is a risk of substandard or counterfeit components. In some cases, part of a system may have to be redesigned, which also is costly.
Click here to read the full article by Jim Carbone