November 2022

Maintenance and Reliability

Obsolescence management in a manufacturing unit

Obsolescence is one of the most detrimental and worrisome issues in manufacturing units. This is predominantly because of rapid advancements in technology.

Bhattacharya, R., Contributing Writer

Obsolescence is one of the most detrimental and worrisome issues in manufacturing units. This is predominantly because of rapid advancements in technology. Consistent innovations and development in this era are throwing existing devices and equipment into the obsolescence basket. Similar performing products are being introduced continuously by competitors, with enhanced features and greater capabilities that can yield optimum performance for users.

Original equipment manufacturers (OEMs) are finding that existing products do not generate enough revenue, forcing the withdrawal of support for the supply of spares and services. Compulsion forces most end users to take knee-jerk actions for sustenance. The small business houses continue operation with limping equipment, which leads to unwanted outages of units, resulting in fiscal losses. Conversely, big houses immediately infuse capital expenditure (CAPEX) for upgrades/revamps of obsolete equipment for production continuation. These monetary transactions come as an immediate means of survival and happen on an extemporary basis without a clear path of progress to tackle the issue more systematically.

This article details incremental threat management of obsolescence in a manufacturing unit, detailing how to build a management system to tackle obsolescence before it cripples production units.

Apart from the vast amount of CAPEX involved, the production unit must be stopped for a prolonged period since upgrades may not be possible while the unit is operating. This means that tackling obsolescence must be a carefully considered action based on meticulous techno-economic analysis. Equipment obsolescence in a manufacturing unit is a natural phenomenon and can happen anytime.

Establishing a process of obsolescence management in a manufacturing business is paramount so that a systematic plan is in place to counter the obsolescence threat. Organizations must identify potential obsolescence through the system and display the desire to move from a reactive obsolescence management program to a proactive process. The end users must act in advance to avoid the yielding phase of a production unit. A systematic obsolescence management process must be in place to tackle this issue before it cripples production.

An obsolescence issue in a manufacturing unit may arise due to many reasons. Equipment is under supplier or technical obsolescence when the OEM withdraws support for spares and services. Sometimes, a business decision is taken to stop using equipment and its spares due to costs or health, safety and environment (HSE) considerations. This is user-specific/functional obsolescence. Economic obsolescence involves replacing/upgrading critical equipment because it has outlived its usefulness or is beyond economical repair.

Among these, technical obsolescence is the most worrisome issue for a production unit, and the threat of equipment becoming irrelevant during its lifecycle looms. Critical equipment faces outages due to the unavailability of OEM support, which challenges manufacturers to continue uninterrupted production without critical obsolete equipment.

Generally, OEMs extend support in two phases: warranty and post-warranty support. In the warranty support stage, OEMs confirm the availability of the product. During this phase, OEMs extend all spares and services support for the product. This phase spans out up to 5 yr after the product is introduced to the market. Subsequently, the product enters the end-of-life and end-of-service (EOS) stages. These stages are between 5 yr and 8 yr after the product launch.

In the post-warranty support stage, the OEM ends all equipment development and declares limited support for the product. This is the penultimate stage before the product is phased out, known as the end-of-development phase. Generally, it becomes prominent within 8 yr–14 yr of the product’s lifecycle.

The ultimate phases of the product are the EOS life and end-of-support phases. In these phases, the OEM declares the product obsolete and indicates EOS and the unavailability of any product updates. In this stage, the OEM stops selling equipment spares and service contract renewals for maintaining the equipment. Typically, this phase appears within 14 yr–20 yr of the product’s launch. Beyond this phase, the equipment becomes completely obsolete and continuing to operate it becomes challenging and costly.

When the obsolescence phase engulfs an operation unit, it experiences frequent downtime due to the absence of virgin spares and OEM services. There is an added risk of damaging credibility with customers if a plant fails to meet anticipated output.

Additionally, attempts should be made to reduce maintenance costs by reducing rush orders due to obsolete equipment spares. It is also paramount to increase plant safety levels by timely decommissioning and disposing of obsolete equipment.

Therefore, a process of obsolescence management must be in place that enables a mitigation plan to be framed before it impacts the production unit. The following is a general framework for the process:

  • Step 1: Identify obsolescence and proactively implement risk mitigation strategies to improve reliability. The identification of potentially obsolete equipment should be carried out through various tools such as a root cause analysis report, a recurring failure report, a report on the plant’s mechanical integrity, a corrosion and inspection report, and various safety audit reports published as a part of internal management’s practice for a manufacturing unit. These reports will expose the obsolete production equipment, as well as those underperforming because of a lack of OEM support. Even a substantial increase in equipment maintenance cost will be brought under the scope as spares and service contracts for obsolete equipment become high.
  • Step 2: The engineering team must assess the extent and scope for all potential obsolete equipment as identified in Step 1. It may be the entire piece of equipment or a component of the equipment that becomes obsolete. The most common partial obsolescence cases are the components of a system where the sub-supplied items become obsolete more quickly than the original equipment, which may still be in the production phase.
  • Step 3: In the case of partial obsolescence, a technical discussion must be conducted with alternative suppliers who can provide the same obsolete components compatible with the original equipment. This may provide assurance for the continued functioning of the equipment without any stoppage due to obsolescence. For example, the third-party interfacing unit or the human-machine interface unit of a process control system can be developed for outsourcing from alternative vendors in case of obsolescence. This may prevent the revamp of the control system.
  • Step 4: The lifecycle strategy must be worked out for all identified critical obsolete equipment so that a 5-yr plan for equipment upgrades may be developed. The following data must be collected before developing an equipment lifecycle plan:
    • Equipment criticality (HSE/production)
    • Equipment installation base
    • Time of obsolescence declared by OEM
    • Extent of spares/service support available by OEM for obsolete equipment and the time frame till the OEM continues support
    • Available spares
    • Rate of consumption of spares
    • Failure rate of the equipment.
  • Step 5: Assess the expected obsolescence phase based on the lifecycle strategy. Decide on whether a complete or partial upgrade will be executed and identify the proposed phasing of the upgrade. A product might be declared obsolete by the OEM, but the end user may opt for a staggered action plan depending on the respective phase of obsolescence. The obsolescence phase is determined based on the lifecycle plan of the equipment.
  • Step 6: Work out the mitigation plan for the impact created due to no available alternatives. In that case, the process design might need to be changed to accommodate the absence of alternatives until the revamp/upgrade of the system is implemented.
  • Step 7: Conduct the cost-benefit analysis of spares/service support and decide whether to stock up on
    spares/service support or look for an immediate upgrade.
  • Step 8: Have a technical discussion with the OEM to evaluate alternatives with assorted options for required changes/upgrades. The upgrades may contain enhanced features that enable the equipment to function more efficiently, and the enhanced features are to be weighed while evaluating the main equipment function.
  • Step 9: Conduct a techno-commercial assessment and negotiate with suppliers to evaluate various upgrade options.
  • Step 10: Decide whether a complete or a partial upgrade will be executed and identify the proposed phasing of the upgrade.
  • Step 11: Define the specification sheet for the new equipment.
  • Step 12: Develop preliminary upgradation budget requirements based on the identified obsolete equipment and evaluate alternatives.
  • Step 13: Compare the preliminary budgetary requirements with guidelines from the annual planning process (in terms of allocation) and evaluate overall maintenance/shutdown schedules to determine schedules.
  • Step 14: Prioritize budgetary requirements and define the upgradation timeline for each obsolete equipment. In case of deferral, work out additional alternative strategies for obsolete pieces of equipment.
  • Step 15: Obtain management approval for the upgradation budget.
  • Step 16: The progress and efficacy of the obsolescence management program must be monitored periodically. The following suggested key performance index can be followed:
    • The frequency of production outages or HSE incidences due to obsolete equipment
    • The ratio of obsolete inventory and total inventory
    • The ratio of equipment covered under the obsolescence management program and the equipment in which potential obsolescence is identified
    • The amount of equipment with an obsolescence plan.

Obsolescence phases

The phases of obsolescence include the following:

  • Phase 1: Upgradation within 1 yr
  • Phase 2: Upgradation within 2 yr
  • Phase 3: Upgradation within 3 yr
  • Phase 4: Upgradation within 5 yr.

The process for obsolescence management may be adopted in different versions. However, before obsolescence issues become a critical problem, forcing emergency decisions, obsolescence must be addressed at an appropriate time to develop a mitigation plan accordingly. HP

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