Your job is to keep the service supply chain healthy. You buy service spares from the manufacturing entity of your company or from a contract manufacturer whose first priority is making parts and products for your company to sell as new. There will come a time when the manufacturer announces a last production run for parts as they plan to re-tool for a new product. The problem is that your customers who bought the old product still need support. They still need a technician fully outfitted with spares for the old product to be on call if they should have a problem. Just because the manufacturer plans to stop making parts for this discontinued product, does not mean your customers won’t still demand working spares to support their critical uptime needs. In short, the service support life often exceeds the manufacturing period. When this happens, it is very common to order a “lifetime buy” of parts at the very end of the manufacturing period. You have to be ready to accept a large batch of parts to sustain your customer support needs throughout the remaining support period. Often, this can be another several years.
What is the one thing that we know for sure about a lifetime buy forecast? The answer is simple, it will be wrong. You will either have too many parts and will be faced with a costly write-off, or you will be short and leave your customers hanging. It is difficult to predict the future and the further out in time one has to forecast, the less accurate it will be. The bottom line is that having to make a lifetime buy decision is a no-win situation.
A solution which drastically reduces the lifetime buy decision stress is to adopt a repair strategy. The approach is rather simple. When a unit fails in the field, the core is recovered and the unit repaired / refurbished to be as good as new. Fundamentally, this approach takes the guess work out of predicting how many units are going to fail in the future. You don’t need to know how many are failing; only that you have a reliable means to repair the units now and into the future. A repair strategy can be very cost effective as well as there is little to no wasted expense. By matching the expense (the repair) with the need (field failure) when it occurs, you are not only delaying the expense, but you don’t have to make that lifetime buy guesstimate.
If you have an effective repair strategy, the only remaining challenge is effectively balancing your long-term declining demand and your scrap rates. For example, if you were repairing all the parts that failed and demand was level, then all would be fine. However, some parts that fail may be beyond repair and are candidates for scrap. Before panicking, you would need to assess if demand was declining. If demand is shrinking, then even with some level of scrap, you may still have enough spares to support lower safety stock levels. If demand is not dropping and due to scrap, you still have a need for some level of additional inventory, there are still alternatives to a lifetime buy. Many companies utilize partners who are talented in locating used products in the marketplace and harvesting spare parts from these.
The next time you are faced with making a large lifetime buy decision, ask yourself if the product is a good candidate to for a repair strategy.
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