RoHS means more electronic component obsolescence
By James Carbone -- Purchasing, 12/14/2006 2:00:00 AM
Buyers have had to deal with the problem of obsolete parts for years, but the European Union's Restriction of Hazardous Substances (RoHS) law has added a new wrinkle to the issue.
RoHS bans the use of lead and five other substances from being used in equipment sold in Europe. Many suppliers have ceased making parts with lead and the other substances, effectively obsoleting the components. However, rather than issuing an end-of-life (EOL) notice for the parts informing buyers the leaded versions are no longer made, many suppliers issue product change notices (PCN).
While that may seem to be a matter of semantics, it isn't. Many non-leaded parts often can't be used in the same manufacturing processes as leaded parts. The solder temperature for a non-leaded part is higher than a leaded component. So when a manufacturer stops making a leaded part, the component is effectively obsoleted for many companies that used leaded parts.
However, without an EOL notice, buyers may not be aware a noncompliant part will no longer be available. Many OEMs still use noncompliant parts, including defense, aerospace and medical companies, which are exempt from RoHS.
Bryan Brady, vice president and director of the defense aerospace business unit for Avnet Americas, says suppliers have hesitated to classify a product as end-of-life “because they don't want a bunch of returns and they don't want to inspire a lifetime buy cycle.”
When a part goes end-of-life the supplier issues a notice telling buyers they have six months to place purchase orders and then the part will become obsolete after 12 months, says Brady.
Brady says suppliers convert the status of the noncompliant part to noncancellable, nonreturnable and attempt to bleed off the channel inventory. “They may even raise prices on the leaded version to try to move the customer bases to lead-free,” he says. The product also disappears from the supplier's website.
“This is not sneaky. It's just a way suppliers are trying to mitigate overhang of inventory and move the customer base to the parts they are building,” says Brady.
The problem impacts buyers at companies in industries that are exempt from RoHS or are building products strictly for the North American market which isn't governed by European environmental initiative.
The challenges that those buyers face are the same as all buyers who are responsible for sourcing other obsolete parts. Buyers must manage the end-of-life (EOL) and product change notices (PCNs) issued by companies and also find alternative source for the parts obsoleted by component manufacturers.
The job of such buyers is getting harder because the number of EOL notices and PCNs issued by suppliers increases every year in part because of RoHS and because product lifecycles are generally getting shorter than they were in the past. Often the shorter the product lifecycle, the quicker components become obsolete.
“We see a lot of obsolescence right now. Our rate of publishing notices is increasing,” says Cliff Frescura, CEO of PCNAlert, a company that provides software and services that help companies manage component obsolescence.
He says in 2000, 240,000 EOL notices were issued by suppliers. In 2005 that figure increased to 1.6 million and is forecast to reach 1.88 million in 2006.
An increase in the number of notices in itself is not necessarily an issue. The problem is a lot of buyers and engineers who need to be informed when a part goes obsolete never see the notice. The larger a company and the more sites it has, the greater the problem.
“The problem is when a supplier wants to notify customers about an EOL or PCN, they go by who bought the part over the last 24 months,” says Frescura. “Well, if an electronics manufacturing services (EMS) provider has shut down a facility or a contact person has moved to another location that creates a gap in communication,” he says.
He says another issue is a buyer at one site may get the notice, but “doesn't know what to do with it.” In a large company it may not be known which sites are using the part, he says.
Frescura says there needs to be a central point at an OEM or EMS company where all EOL notices go. “That point should have all the AVLs and bills of materials for the company's different sites so the notices can be filtered against the AVLs and BOMs,” says Frescura. Then the notices can be distributed to the sites that use the EOL part.
PCNAlert collects the PCNs and EOLs from suppliers and offer software tools that help companies manage those notices.
Large distributors such as Avnet and Arrow also offer tools to help manage product obsolescence.
Avnet's Premiere Supply Chain Services group BOM manager tool delivers EOL and PCN notices to a buyer's desktop. It also reviews BOMs and suggests substitutes for parts being obsoleted. Arrow Alert provides real-time notifications of EOL and PCNs to buyers, says Darr Greenhalgh, director of supply chain solutions for Arrow Electronics. “We cross reference them over to the appropriate RoHS-compliant parts.”
Once an EOL notice for a part is issued, buyers must find alternate sources for the part, make a lifetime buy or find an aftermarket suppliers to make the part or qualify a new part. Many companies in defense and aerospace industries don't like to substitute a new part because of the high cost to qualify a new component.
“Many times a company would rather pay more for even a custom solution to replace that obsolete part rather than to redesign or qualify a new product,” says Brady.
Brady says there are many options for buyers when a part goes obsolete. “There are multiple responses. The buyer can figure out how many of the soon-to be obsolete parts he needs to support his equipment and place an order. We may negotiate if the buyer wants us to hold the inventory for period of time. The buyer may say, 'we will buy 10,000 pieces but we want you to stock it and ship a certain quantity quarterly,'” says Brady. Avnet will determine the carrying cost and the cost of money and negotiate a price with the buyer.
Avnet and other distributors will often buy obsolete parts from aftermarket supplier Rochester Electronics, based in Newburyport, Mass.
“Typically we go to Rochester first when we are looking for obsolete parts,” says Brady. “If they don't have it then we look to see if we can buy die from the factories and we have relationships with other aftermarket manufacturers that will assemble it on a custom basis for us,” he says.
Rochester says its business is supplying parts “on the trailing edge of technology” and stocks over 5 billion die and manufactures over 15,000 different devices discontinued by the original supplier. Products are manufactured using the exact die, assembly piece parts, assembly contractor, test program, test hardware and test system as used by the original supplier during prime production.
In some cases parts have to be emulated. “Emulators will reverse engineer a part and emulate it in the form of an application-specific integrated circuit and provide a form, fit and function replacement,” says Brady.
Many buyers turn to independent distributors for obsolete parts. Independents often buy excess inventories from OEMs, EMS providers or other distributors. Many of those parts are obsolete.
Some independents have obsolete part programs that help buyers manage end-of- life buys. Case in point: Fusion Trade in Andover, Mass. “We have a program called predictable end-of-life inventory management,” says John Irving, executive vice president.
“When an EOL goes out and a buyer thinks it's time to make a last time buy we give them market information and advise them if they need to do that,” he says. Sometimes they can find the product from other sources.
If a company opts for a lifetime buy, Fusion “has a system in place where we can manage the company's demand against their actual usage,” says Irving. Sometimes a company will make a lifetime buy, but then discover it did not need as many parts as it thought.
“If a company expects to use 1,000 pieces per month for the next 12 month, we can monitor that. If we see in the last two months the company has used only 500 pieces, then there is a 1,000-piece excess. We can go out and resell that excess and give the company a healthy return.”
While buyers may make lifetime buys or source parts from aftermarket suppliers, they must also continue to fine tune their strategies for dealing with component obsolescence because the problem is not going away.
“Component obsolescence will always be with us,” says Brady. “It continues to be an area of interest for buyers as product lifecycles shrink.”
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