• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
    • Webinar Library
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Product Lifecycles Create 'Gap' in Electronics Supply Chain Filled by Unauthorized Components

Product Lifecycles Create 'Gap' in Electronics Supply Chain Filled by Unauthorized Components

October 2, 2013
Steve Martin, EVP of Sales, Components Direct, an Avnet Company

Tale of two lifecycles

At its simplest level, the conflict between the original component manufacturer's and the original equipment manufacturer's product lifecycles sometimes creates gaps which result in excess supply or unmet demand.  Upon introducing a new component, a component manufacturer quickly ramps production to take advantage of market demand at the time of peak profitability for the new component. However, if forecasts are not aligned, this may result in the first type of "lifecycle gap," where supply outstrips demand, and excess product becomes available in the market. As product sales slow and the component reaches the end of its lifecycle, the manufacturer begins to scale back production and may begin the process to "end-of-life" (EOL) the component.  This potentially creates the second type of "lifecycle gap," where buyers continue to demand a key component but it is no longer available from the supplier.  The EOL phase of a particular component is often difficult for customers because it can cause a disruption in their manufacturing flow and planning and result in significant financial impact, particularly for customers with long product lifecycles such as the military or medical industry.  Manufacturers who EOL their products do not move a component into its EOL phase without much planning, as they must weigh the risk to their customer relationships against the ever increasing costs of keeping older lines running and supported. But at some point the costs simply overshadow the revenue generated. It is as this cross point, when OEMs and other buyers are unable to satisfy their demand for the now end-of-life and obsolete components that they often turn towards sources other than the original manufacturer and its authorized and franchised distributors to procure the product they need. This is when the trouble begins.

Industry needs are diverse

This lifecycle scenario varies across industries as product lifecycles in the electronics industry fluctuate widely, from a couple of years for consumer electronics to sometimes over 20 years for military and aerospace electronics.  In general, the lifecycle for consumer electronics is shrinking due to changing tastes, demand for increased capability, and intentional product obsolescence on the part of manufacturers, whereas in other areas, such as military/defense, lifecycles are lengthening due to economic impacts, heavy upfront investment that is recouped over several years, and a growing awareness of the environmental impacts of constantly changing electronics versions. 

"¢ In recent years, Apple has become the poster child for the rapidly shortening lifecycles of consumer electronics. In late 2012, when the company launched the iPad 4, just seven months after debuting the iPad 3, customers expressed their frustration on social media and with their wallets, as sales lagged behind those of the iPad 3 at its launch. While the iPad 4 contained several enhancements over its predecessor, the differences were not great enough to justify the short lifecycle of the iPad3. In this and other consumer electronics examples, lifecycles are compressed because of competitive pressures and marketing imperatives, rather than true technological advancements. Still, the impact on the electronics supply chain is the same. Component manufacturers keep up with the demands of the consumer electronics industry, which generates significant profits, by introducing ever newer components to chase market demand. If manufacturers don't keep up with burgeoning demand, consumer electronics OEMs will turn towards other sources.

"¢ Military and defense electronics illustrate the flip side of the lifecycle issue, with extremely long lifecycles resulting in a component supply gap. A June 2012 study by the Lexington Institute revealed that a key argument against the then-imminent cuts in the defense budget due to sequestration was that the military desperately needed to upgrade weapons systems that, in some cases, have been in place for more than three decades. While that is an extreme example, it is true that many defense projects, which require extensive development times and billions of dollars to produce, are expected to remain in place for several years. The military product lifecycle is much longer than that of consumer products. Some of this is by design, not just due to budget pressures. Projects are increasingly designed with a lifecycle design philosophy that emphasizes sustainable design and an improved maintenance program. Long-term (up to 15 years or more) access to electronics components is part of this philosophy. Defense and aerospace projects may need much older date code, obsolete, or end-of-life products and, as a result, buyers are seeking a supplier that offers manufacturer-direct access to these products, as well as the ability to hold parts in a safe and controlled environment for processing in the future. When these parts are unavailable, this gap between supply and demand opens the door for gray market product to enter the military supply chain, which increases the chances of counterfeit products being present. This has led, in the case of the military electronics components supply chain, to increased oversight by government regulators.

What is a buyer to do?

The "lifecycle gap," created by lack of supply from the manufacturer combined with sometimes urgent requirements to support older products is forcing buyers to look for alternate sources, including brokers and/or the gray market suppliers who exploit the needs of buyers for obsolete and end-of-life components. This makes it easier for counterfeits, or at least unauthorized components, to enter the supply chain. This is not a small problem. According to a 2012 study by market research firm iSuppli, 12 million counterfeit parts were reported in the last 5 years, and 57 percent of counterfeits reported from 2001 through 2012 were obsolete or end-of-life components.  Moreover, a May 2012 report by the Senate Armed Service Committee confirmed that an "overwhelming majority" of the more than one million counterfeit parts identified in an investigation of the DoD's supply chain were sourced from independent electronic parts distributors.  Eliminating obsolete and end-of-life parts is not feasible, as they are vital to ongoing projects. The iSuppli research comes to the same conclusion: ""¦it's unrealistic or technically infeasible to economically eliminate the use of all obsolete parts." Counterfeits and the gray market pose significant risks and long-term impact on suppliers including decreased revenues, harmed brand reputation, and increased liabilities.

Clearly a better solution is required. Fortunately, buyers have an alternative in the form of franchised E&O (excess and obsolete) distributors that maintain a comprehensive range of components to meet the needs of buyers for longer-lifecycle products. An authorized or franchised distributor with guaranteed traceability back to the original components manufacturer is as good as purchasing from the manufacturer itself. These distributors can also store inventory from the manufacturer in compliance with industry regulations and standards giving both the manufacturer and the buyer comfort that parts are handled and stored in the correct way.  Markets are fickle and forecasts are often wrong, so manufacturer and OEM lifecycles will never perfectly conform. Fortunately, with franchised distributors creating a more secure supply chain that meets the lifecycle demands of both the original component manufacturer as well as their buyers, they don't have to.

Source: Components Direct

Keywords: supply chain risk management, electronics supply chain, counterfeit parts, end-of-life components, obsolete components

RELATED CONTENT

RELATED VIDEOS

Global Logistics Product Lifecycle Management Sourcing/Procurement/SRM Technology Business Strategy Alignment Global Supply Chain Management Quality & Metrics Regulation & Compliance Supply Chain Security & Risk Mgmt High-Tech/Electronics
KEYWORDS an Avnet Company Business Strategy Alignment Components Direct counterfeit parts electronics supply chain end-of-life components EVP of Sales Global Logistics Global Supply Chain Management High-Tech/Electronics obsolete components Product Lifecycle Management Quality & Metrics Regulation & Compliance SC Security & Risk Mgmt Sourcing/Procurement/SCM Steve Martin Supply Chain Analysis & Consulting Supply Chain Management: High-Tech/Electronics Supply Chain Risk Management Technology
  • Related Articles

    As Innovation Unfolds in Electronics World, Supply Chain Runs to Keep Up

    Just-in-Time Manufacturing Carries Both Good and Bad for Electronics Supply Chain

    Transforming the Supply Chain for a New Era in Electronics Manufacturing

Steve Martin, EVP of Sales, Components Direct, an Avnet Company

More from this author

Subscribe to our Daily Newsletter!

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • DOCUMENTS BEARING THE INSIGNIA OF US CUSTOMS AND BORDER PROTECTION LIE ON A TABLE

    New CBP Regs Call for Greater Diligence by Brokers in Reporting Security Breaches

    Freight Forwarding/Customs Brokerage
  • A WORKER IN A WAREHOUSE, SUPERIMPOSED WITH GRAPHICS SHOWING SUPPLY NETWORK

    Enabling Intelligent Visibility With Supply Chain Analytics

    Data Management (Big Data/IoT/Blockchain)
  • A HAND TURNS A LARGE, LIGHTED DIAL WITH THE WORD RISK ON IT iStock-NicoElNino-1364371014.jpg

    Measuring KPIs and KRIs for Comprehensive Supplier Performance Management

    Technology
  • GSCMS-Promo.png

    Watch: Introducing the Global Supply Chain Marketing Summit

    Education & Professional Development
  • DEEPLY CRACKED EARTH UNDER A BLUE CLOUDY SKY

    Why Maritime Supply Chains Must Adapt to Sustainability Regulations

    Ocean Transportation

Digital Edition

Scb nov 2022 sm

2022 Supply Chain Innovator of the Year

VIEW THE LATEST ISSUE

Case Studies

  • New Revenue for Cloud-Based TMS that Embeds Orderful’s Modern EDI Platform

  • Convenience Store Client Maximizes Profit and Improves Customer Service

  • A Digitally Native Footwear Brand Finds Rapid Fulfillment

  • Expanding Apparel Brand Scales Seamlessly with E-Commerce Technology

  • How a Global LSP Scaled its Security Program and Won More Business

Visit Our Sponsors

Orderful Yang Ming Alithya
Barcoding Blue Yonder BNSF Logistics
CoEnterprise Data Capture Deposco
E2open GAINSystems Generix
Geodis GEP GreyOrange
Here Honeywell Intelligrated IFM
Infor Inmar Keelvar
Kinaxis Korber Lean Solutions Group 2H
Liberty SBF Locus Robotics Logility
LogistiVIEW Lucas Systems MCA Connect
MPO Nvidia Old Dominion
OpenText ORTEC Overhaul
Parsyl PMMI QIMA
Redwood Logistics Ryder E-commerce by Whiplash Saddle Creek Logistics
Schneider Dedicated Setlog Holding AG Ship4WD
Shipwell Tecsys TGW Systems
Thomson Reuters Tive Trailer Bridge
Vecna Robotics Verity
Verusen
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2023 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing