Why Obsolescence Management Needs Lifecycle Forecasting—and How Z2 Can Help

Article Highlights:

• Obsolescence management can be understood as the programs and practices an organization establishes in order to mitigate the effects of component obsolescence. A strong obsolescence management system may draw on a myriad of different strategies to reduce the consequences of discontinuance, extend the lifespan of their parts, and minimize the costs associated with replacing obsoleted components. 
• A critical obsolescence management tool, lifecycle forecasting is the practice of projecting how long a specific component will remain in active production before the manufacturer discontinues it. The practice often relies on an algorithm or related mathematical formula, incorporating a range of different variables to arrive at an accurate estimate of the amount of time a part has until it falls into obsolescence. 
• The lifecycle forecasting tool used by supply chain risk intelligence platform Z2 has proven to be one of the most accurate and effective in the industry. Z2 tests its projections against actual obsolescence data on a quarterly basis, and currently has an accuracy rate of over 90%.

Today’s most high-profile supply chain disruptions are often centered around trade, tariffs, and geopolitical tensions. But despite these new and flashy disruptions that grab headlines, manufacturers must still contend with many of the same core risks that have been around for generations. 

Obsolescence is one example of these longstanding risks. Though not covered with the same breathlessness as the Trump administration’s tariffs or ongoing geopolitical battles, obsolescence remains an ongoing challenge—one that’s only intensified in recent years. In 1970, the typical lifecycle for a semiconductor was around 30 years. Jump ahead to 2014, and that lifespan contracted to just a decade. Move ahead another 10 years or so, to 2025, and the length of time from new part introduction to end-of-life (EOL) for advanced semiconductors is just two to five years. 

This stark diminishment in the lifespan of electronic components is one of the major reasons why obsolescence management is so critical to original equipment manufacturers (OEMs) and other businesses that source electronics. Identifying impending obsolescence risks and implementing strategies to mitigate those impacts can be a crucial way for companies to manage their overhead and preserve production continuity. And one of the most essential functions for any robust obsolescence management program is lifecycle forecasting. 

What Is Obsolescence Management?

Obsolescence management can be understood as the programs and practices an organization establishes in order to mitigate the effects of component obsolescence. A strong obsolescence management system may draw on a myriad of different strategies to reduce the consequences of discontinuance, extend the lifespan of their parts, and minimize the costs associated with replacing obsoleted components. These include:

Design Products With Component Lifecycle in Mind

In many cases, obsolescence management is a siloed responsibility within an OEM, isolated from other professionals and wielding little influence over their processes. But obsolescence management is at its most effective when it’s a more integrated function. When product designers and engineers incorporate EOL considerations into the design process, products are more likely to have bills of materials (BOMs) with newer, more resilient parts that last as long as possible. In order to do that, however, engineers and procurement professionals must look at not only the length of time a component has been on the market, but other instrumental factors like the commodity’s average lifespan and the demand for it in the marketplace. 

Develop Diverse Supplier Networks

The world of supply chain risk management (SCRM) often feels oversaturated with terms like alternative suppliers and supply chain diversification. But there’s a reason this language is so persistent: The size and depth of a manufacturer’s supply chain is often correlated with its overall resilience, and obsolescence management is no exception. Organizations that source from multiple suppliers, pre-qualify alternative producers, and “split” their orders across multiple manufacturers are better positioned to pivot when a major product discontinuance notice (PDN) arrives. 

Put differently, one of the worst positions an OEM can be in is to have a single-source dependency for a critical part that just received an EOL notification.

Put differently, one of the worst positions an OEM can be in is to have a single-source dependency for a critical part that just received an EOL notification.

Establish Internal Process for Managing PCNs 

Many companies don’t have an established workflow for managing the many product change notifications (PCNs) and product discontinuance notifications (PDNs) they receive throughout the year. And while these messages are often neglected or dismissed, they serve as a critical juncture in the obsolescence management process: a PDN effectively starts the clock on a part’s evaporation from the supply chain. 

Teams that have a consistent internal process for handling these notifications and using them to trigger streamlined workflows are significantly less likely to overlook a crucial obsolescence event. Further, PCN workflows ensure that each team member knows their full scope of obligations every time a component, BOM, and product faces an obsolescence risk. This minimizes the chances that a diffusion of responsibility takes hold—more commonly understood as “kicking the can down the road.”

Identify and Qualify Crosses 

Just as qualified alternative suppliers are essential to effective obsolescence management, identifying and qualifying alternative parts is another critical tool in mitigating EOL disruptions. OEMs and other companies that source electronic components can draw on form/fit/function to confirm the best available crosses for their parts, and then rapidly deploy that information if a part enters obsolescence. 

Having a robust supply of pre-qualified crosses can significantly reduce the chances that a given obsolescence event forces a product into redesign—a costly, time-consuming sequence of events that manufacturers and their engineers will do almost anything to avoid. 

Utilize Effective Lifecycle Forecasting

As valuable as the above-mentioned strategies are, the practical limitations of many engineering and procurement teams means that they can rarely be utilized for a company’s entire parts database. Businesses, in other words, need to prioritize parts, and to do that they need to have an understanding of what parts pose the highest obsolescence risk. One of the most consistently powerful ways to gauge obsolescence risk is through lifecycle forecasting. A 2019 paper published in the International Journal of Industrial Engineering and Operations Management explains the merits of lifecycle forecasts. “Through obsolescence forecasting, companies can ensure support for parts in service and mitigate any negative impact by identifying parts that are likely to become obsolete,” the authors write.

This is part of why lifecycle forecasting can be so valuable to OEMs. Organizations that are able to draw on effective, reliable lifecycle forecasting can classify their parts accordingly, compartmentalizing their databases and allowing them to allocate their resources to the highest-risk parts. Practicing effective obsolescence management means understanding the practicalities of the job—including the fact that many companies cannot afford to supply every part with crosses, alternative suppliers, and other EOL mitigation strategies. By using lifecycle forecasting as a framework, businesses can filter out the more stable parts, enabling them to focus on the components most likely to trigger costly disruptions through discontinuance. 

Organizations that are able to draw on effective, reliable lifecycle forecasting can classify their parts accordingly, compartmentalizing their databases and allowing them to allocate their resources to the highest-risk parts.

What Is Lifecycle Forecasting in Obsolescence Management?

In order to effectively deploy this tool, however, it helps to establish a clear definition of what it is. Lifecycle forecasting is the practice of projecting how long a specific component will remain in active production before the manufacturer discontinues it. The practice often relies on an algorithm or related mathematical formula, incorporating a range of different variables to arrive at an accurate estimate of the amount of time a part has until it falls into obsolescence. 

What those variables are—and how much they are weighted by the algorithm—is a critical part of the forecasting process. 

• Commodity Lifespan: To get a sense of how long a component is likely to stay in production, forecasting takes into account the average lifespan of other parts in its commodity category. 

• Market Demand: While the decision to discontinue a part can be influenced by a number of factors, the most important one is typically the demand for the part in the electronics marketplace. Parts with robust demand stand a good chance of staying in production, while components with low or tapering demand are at increased risk of EOL. 

• Manufacturing Sites: To get a better understanding of how committed the supplier is to producing a given part, forecasts often incorporate the number of manufacturing sites where the component is actively being produced. Components made at multiple sites indicate steady demand and a strong commitment to manufacturing the part. 

• Technology Roadmaps: Stronger lifecycle forecasting tools will go beyond the average lifespan of a part’s commodity group, and examine the specific technology being utilized in the component. The generation and popularity of a part’s underlying technology can yield insight into lifecycle: parts that use newer technologies that are still on the rise will likely have a few years or longer to EOL. Parts manufactured with legacy technology, on the other hand, are much more vulnerable to low market demand and discontinuance. 

How Z2’s Model Predicts EOL With Industry-Leading Accuracy

While lifecycle forecasting remains a relatively niche function, there are still a host of different resources that carry it out for the electronics manufacturers. The lifecycle forecasting tool used by supply chain risk intelligence platform Z2 has proven to be one of the most accurate and effective in the industry. Z2 tests its projections against actual obsolescence data on a regular basis and currently has an accuracy rate of over 90%. (On a quarterly basis, Z2 takes all the parts from its database that were obsoleted over the last three months and compares their actual obsolescence date against the date projected by Z2’s forecasting tool. On average, fewer than 10% of these parts are forecasted incorrectly by the algorithm.)

To achieve and maintain this level of accuracy, Z2 consults dozens of sources and hundreds of data points for every part, including:

• Datasheets
• Manufacturer notifications
• Geographical information
• Market data
• Production distribution
• Technology node
• Compliance statuses

These factors are then incorporated into an algorithm that assigns a specific weight to each factor according to its importance. Z2 has continuously refined this process over the course of a decade, updating the algorithm to reflect changes in the supply chain and electronics manufacturing sector. 

After pulling the data together and running the calculations that go into the algorithm, Z2 produces a lifecycle forecast for every part in its database. These forecasts are available to customers on hundreds of millions of components. High-end lifecycle forecasting like the one maintained by Z2 provides actionable value to original equipment manufacturers (OEMs) and other businesses operating in the global supply chain. 

• Inform Obsolescence Management: Companies that want to embed obsolescence management into new product design, manufacturing, and supply chain risk management can use Z2’s lifecycle forecasting tool to help inform their strategy and focus. 

• Classify Parts Based on Risk: Lifecycle forecasting gives businesses a powerful tool for compartmentalizing their parts, separating the high-risk components from those that don’t require the same level of scrutiny or management. 

• Guide Immediate Mitigation Measures: Finally, forecasts direct companies on where to allocate mitigation resources right now, pointing to risky components that demand alternative suppliers, crosses, or inventory stockpiling (strategic purchasing), among other strategies teams can deploy to minimize disruption risk. 

Finally, in addition to Z2’s lifecycle forecasting algorithm, the tool monitors manufacturer websites for EOL events—even those for which no PCN or PDN was issued. 

To learn more about Z2 and its industry-leading lifecycle forecasting tool, schedule a free trial with one of our product experts.