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IHS Acquires PCNAlert.
Component Event Management encompasses
all of the change management events surrounding components such as parametric changes, physical changes and chemical
composition changes. These component changes have a direct impact on metrics such as time to market, inventory turns,
excess and obsolete inventory and direct material costs, to name a few."
Source : PCNalert
The Importance of Component Event Management in a PLM Strategy
Event Management is also known as :
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Event Management Services.
Executive Overview
There is a fundamental disconnect in the lifecycle of products that contain electronic
components that drives excess costs for OEMs and contract manufacturers that produce
these products. This disconnect is not between the products and the electronic
components that they contain, but between the lifecycles of the products and the lifecycles
of the components. The root cause of the lifecycle disconnect is that the duration of an
electronic component’s market life is significantly shorter than the life of the product that
contains it. This is often true for the active selling life of the product, but even more true
for the maintenance portion of the product lifecycle. With component lifecycles
shrinking, and environmental initiatives (RoHS / WEEE) growing, it is becoming more
difficult to manage the lifecycle of products that rely on the components inside.
The impact of the product-component lifecycle disconnect is that manufacturers must
expect and accommodate disruptions in component lifecycles during the active life of
their products. This disruption can result in significant costs to the business, as well as
significant lost opportunities. These costs can take many forms. In the extreme case, a
component change could result in a part shortage that would shut down production or
limit the ability to service a product. The direct cost and impact on customer satisfaction
in these situations can be astronomic. More frequent scenarios fall short of those highprofile
scenarios, but accumulate to significant costs. Parts may need to be procured at
highly unfavorable rates because of reduced negotiation time, the company may be
saddled with excess inventory, or they may face a critical shortage of inventory and need
to buy through brokers at significantly higher costs. A commonly reported statistic is that
80% of a product’s costs are locked in at design time. Without proactive management of
changes in component lifecycles, that 80% cost is not only locked in as a minimum cost,
it is also at risk to inflating rapidly because of a component lifecycle issue. To compound
the issue, an increasing amount of product manufacturing is being outsourced, making the
problem more complicated as the OEM, contract manufacturer and potentially third party
design firms must coordinate to effectively respond to component lifecycle disconnects.
The most challenging obstacle to resolving component lifecycle disconnects is time.
Given time, companies can react to component lifecycle problems. End of Life (EOL)
notices and Part Change Notifications (PCNs) are an everyday occurrence, but many
companies don’t have a process to effectively monitor the impact of these changes, or
“Component Lifecycle Events”. With each passing day that an event is not identified and
acted upon, the options for resolution become less palatable and more expensive. The
time required to address a Component Event includes the time to identify the relevance of
the event, to react to the event and to bring the event to a resolution. Without a
disciplined process to identify, react to and resolve Component Events, they are like little
bombs waiting to blow up the product lifecycle (or at least the P&L).
Component Event Management promises an answer. Component Event Management is a
methodology to systematically detect and resolve Component Events in the most timely
and efficient manner possible. This paper will introduce the philosophy of Component
Event Management and introduce a new category of software that is being developed to
help implement this concept and improve business performance.
Product and Component Lifecycles - The Disconnect
Industries that rely on electronic components, such as medical devices, aerospace &
defense, communications, networking, test & measurement, computer hardware,
automotive and consumer electronics, struggle to keep up with a basic problem when
managing their product lifecycles. The problem that these industries face is that the life
cycle for their products, whether in active production or in service and warranty repair
mode, is far longer than the average life of the electronic components inside of it. This
means that companies in these industries must stay on top of changes in the lifecycle of
the electronic components they use, particularly End of Life (EOL) notices and Part
Change Notifications (PCNs).
The challenge in managing component obsolescence is not limited to new products, of
course. Some of the largest challenges caused by obsolete components come from
servicing products in use at existing customers. Product usage lifecycles are typically
longer than the active product production, marketing and sale of the product, so older
products don’t always get the attention that they require. Older products provide another
challenge as well, because the product information and bills of material are much less
likely to be accurate and complete. Today’s business suffers from past product and
company acquisitions and reductions of force, resulting in much of the uncaptured
product knowledge being lost. Component engineers that don’t have the benefit of
historical knowledge for products that they did not work with during development are at a
disadvantage when it comes to identifying and resolving component issues.
Further complicating the management of component lifecycles is today’s increasingly
shortened component lifespan. The average lifecycle of an electronic component is short;
some estimate the average to be about two to three years. Lifecycles have become
shorter because of technological advances, but also for financial reasons – such as the
sudden collapse of entire end markets, as we recently saw with the folding of many
businesses servicing the telecom industry. Additionally, regulatory issues can also play a
role in speeding the demise of components, as with the emerging international laws
forcing manufacturers to lessen the contents of lead and other hazardous materials in their
products.
Electronic Component Manufacturers, ECMs, try to adhere to an industry standard of 180
days notice before a part is changed or declared at end of life. Even with shortened
design windows achievable today by better engineering practices and tools such as
Product Lifecycle Management (PLM), rapid response to component changes is essential.
The Impact of Component Events
Electronic components are a major part of the design of many modern products, and are
playing a larger role in products than ever before. As more products have become
“smart”, the requirements for even simple products to sense and react has led to the
incorporation of more sophisticated electronic components. A component change or
obsolescence that goes unnoticed or unaddressed in one of these products can result in
significant costs to the business, as well as significant lost opportunities.
The cost of a Component Event is highly dependent on the time available to resolve the
event. Ideally, a component event is identified during the design cycle for a product and
addressed before any significant commitment is made to the component. Short of that, a
substitute part or alternate manufacturer may be able to be identified, tested and approved
for the product. If the part can’t be substituted or replaced, then alternate sources of
inventory may need to be identified. With enough lead-time, an adequate amount of
inventory can be purchased through the regular channels and at a somewhat reasonable
cost. Purchasing this inventory buffer has associated risks in potentially carrying
unneeded inventory, but can provide a safety net. If too much time has passed and the
regular procurement channels can’t meet the demand, then the company may need to turn
to alternative sources of supply such as brokers where the costs are very likely to be
unfavorable. As a last resort, the product itself could be redesigned so that the offending
component is no longer required, but the cost and lead-time required for this can lead to
significant expense and may not be economically feasible.
The cost of a Component Event isn’t limited to direct costs, however, because on the
other end of a component shortage may be a customer waiting for a needed product. The
direct cost of a mishandled Component Event may be compounded by customer
dissatisfaction and lost business. But the direct costs alone can justify a Component
Event Management strategy. Figure 1, which represents costs developed from the
military sector, was derived from the GIDEP DMS Utilization Module. While these
numbers can’t be applied directly to any particular organization, they illustrate the
increasing costs associated with less favorable resolutions to Component Events.
| Alternative |
Cost |
| Choosing an alternate part
(equal or better specs) |
$4000-$9000 |
| Choosing an alternate part
(worse specs) |
$15,000 - $24,000 |
| Aftermarket (not broker) |
$41,000 - $59,000 |
| Minor redesign |
$82,000 - $153,000 |
| Major redesign |
$361,000 - $505,000 |
Figure 1: Relative Cost of Component Event Resolution Options
Source: Derived From GIDEP (Government-Industry Data Exchange Program)
DMS Utilization Module.
GIDEP is a cooperative activity between government and industry participants seeking to
reduce or eliminate expenditures of resources by sharing technical information essential
during research, design, development, production and operational phases of the life cycle
of systems, facilities and equipment. For more information see www.gidep.org.
The Fuses Have Been Lit
Component Events could be compared to a bomb with a fuse that has been lit, lurking
unseen and waiting to disrupt the lifecycle and profitability of the impacted products.
The first step in addressing a Component Event is identifying that the component change
has occurred, and that it will have an impact. The number of component changes on a
daily basis is large, and sifting through the multiple sources of information is demanding
at best. According to studies conducted by PCNalert, which maintains the industry’s
most comprehensive database of component PCN and EOL information, as many as
20,000 components are materially changed or withdrawn from the market every month.
Given that volume of change, it may be impossible to keep up with all of them manually,
particularly given reduced headcounts typical in many component-engineering groups.
Component Events are not as simple as an End of Life (EOL) notice or Part Change
Notifications (PCNs). While these notifications are the early indicators that a Component
Event may have occurred, they are not meaningful until they are put into context.
Component lifecycle changes must be associated and analyzed in the context of the
products that contain them. A Component Lifecycle Event puts the EOL or PCN into the
context of the impacted products and their associated lifecycles. Without the context of
what products are impacted, the notifications are simply more raw information to sort
through. When the notifications are matched against Approved Vendor Lists (AVL’s)
and product BOMs they can be identified as Component Events.
Component manufacturers, for the most part, will provide the appropriate notifications
that a component is becoming obsolete. Following our analogy, this is the point at which the
fuse is lit, setting in motion three critical lead-times for an OEM’s supply chain:
- The first Component Event lead-time that needs to be addressed is the time from the
notification to the time that a Component Event is identified. This time is highly
dependent on the ability to analyze large amounts of data and put it into context.
- The second Component Event lead-time that must be addressed is the time that it
takes to react to the Component Event. Until the Component Event is delivered to the
appropriate person to resolve it, no progress will be made. This time is highly
dependent on timely notification and clear accountability for Component Events.
- The final lead-time that must be addressed is the lead-time between the initial
reaction and the resolution of the Component Event. This time is highly dependent
on having the right information at hand to quickly analyze and react to the situation.
The combination of these three lead-times largely determines the impact that the
Component Event will have on the business. Therefore, a key goal of Component Event
Management is the reduction of these lead-times and increased efficiency in dealing with
the Component Events.
The Windows of Opportunity Are Closing
The time it takes to resolve a Component Event is extremely critical to effective Product
Lifecycle Management. In order to react to product changes, companies need time to
select the best options. But, the windows of opportunity to choose and execute resolution
options close rapidly with passing time. With enough notice, the component may be able
to be designed out of the product altogether, manufactures of equivalent parts may be
identified, or substitute parts validated for use in the design. As time continues to run out
and the windows of opportunity for these approaches are missed, the only option may be
to purchase additional inventory. Without adequate time to locate sources of supply and
negotiate favorable procurement pricing, companies may be stuck purchasing on
unfavorable contracts or through more expensive, secondary sources of supply like a
broker.
Negative Impact Increases as Windows
Close on the Most Favorable Options
Figure 2: The Impact of Component Events by Time
Source: PCNalert
The options available to address component changes decrease with time, and the cost and
impact increase as option windows close, making the time to react critically important to
the business. The time required to resolve a Component Event is made up of several
factors. The first issue, of course, is determining whether the Component Event will
actually impact the company. Assuming the event will have an affect, in order for a
company to react, they must not only be notified of the change, they must take action on
it. Component change information is available from many sources. What is difficult,
however, is isolating the relevant component change information, determining how it
applies to the company’s products, understanding what options are available to address
the problems and then getting that information to the right people to act on it. In essence,
the challenge is not just having the information. Although accurate and trusted
information is a key requirement, for companies to benefit from the information it must
be transformed into something actionable and delivered to the right person to act on it.
This is not a trivial challenge in today’s environment. Internal resources have gotten thin
from successive layoffs in many companies. Mergers and acquisitions have increased the
number and types of products being managed. And to make it even more difficult, the
increasingly virtual nature of the supply chain is taking component decisions further out
of the manufacturer’s control.
Virtual supply chains and outsourced design and production are also transforming the
resolution of the component issue from a cross-departmental problem, which is already
challenging, to a cross-enterprise problem. Time to react is a factor of getting the right
information to the right person at the right time, and with already thin resources,
companies need to spend scarce design resources on resolving problems and not sifting
through piles of disorganized information. Reacting to the change must also be managed
effectively in order to compress the time required to develop a resolution. Proactive
management of component issues is also required to compress the resolution time,
particularly when the resolution is managed across departmental and corporate
boundaries.
Enter Component Event Management
Component Event Management is an approach for the proactive management of
electronic component lifecycles to provide faster identification, analysis and resolution of
component events caused by product changes (PCNs), obsolescence (EOLs). Effective
Component Event Management minimizes the risk and cost associated with Component
Event impacts on the lifecycle of the product. This new discipline, and the software
applications that support them, should be a part of the PLM Program for any company
that relies on electronic components within their products.
Component Event Management provides a time-based, event-focused element to Product
Lifecycle Management. According to Cliff Frescura of PCNalert, the pioneers in the
concept of Component Event Management, there are 6 fundamental elements of
Component Event Management. These 6 elements are critical to a complete Component
Event Management Strategy in order to identify, react to, and resolve Component Events
in the most efficient and cost effective manner.
The 6 basic fundamentals of Component Event Management are:
- Monitor changes to component lifecycles in the industry
- Analyze the changes to determine which are applicable
- Identify Options and Alternatives (including the impact)
- Notify the appropriate people (with actionable events)
- Manage through to resolution
- Learn to allow continuous improvement
Component Event Management is important throughout the lifecycle of a product. The
challenge of shorter component lifecycles than product lifecycles leads to an unavoidable
problem later in the lifecycle of the product. But problems can be avoided, or at least
delayed, by addressing the component lifecycles throughout the life of the product.
Starting early in the design phase, components should be evaluated for current and
potential changes. As product designs are revised, or old designs re-used for new
products, components should be evaluated for the potential of changes and obsolescence.
Given the dynamic nature of the electronic components industry, this review should be
done on an ongoing basis, and incorporated into stage-gate and design reviews
throughout the product design and further through the life of the product. Profitability
starts with a good design, and designing in bad parts is a sure way to increase risk, cost
and downstream problems. Real-time, accurate visibility to component lifecycle
information plays a key role in avoiding the impact of component problems. By applying
these fundamentals in a unified Component Event Management Program, companies can
reduce the time, effort and cost associated with disconnects in the component and product
lifecycles.
Implementing Component Event Management
Companies that are embarking on an initiative to adopt Component Event Management
must first gauge their current Component Event Management capability, or Component
Event Management Maturity. There are four levels of Component Event Management
Maturity identifiable by some key characteristics of the way the company identifies and
manages component events. The first level represents a totally reactive environment, so
it is classified as Level 0. Each successive level of Component Event Management
Maturity is a step towards a more controlled, and more proactive Component Event
Management environment. The top level, known as Level 3, represents a maturity level
that incorporates the best practices for world-class organizations. A company must know
where they currently fall on the Component Event Management Maturity Matrix (see
Figure 3) and map their path from their current level to the desired level. It is possible to
pass through more than one level at a time with a Component Event Management
initiative, but there will be a need for more careful change management to adopt the new
business processes required.
| Maturity |
Monitor |
Analyze |
Options |
Notify |
Manage |
Learn |
| 0 |
Reactive |
Manual |
Manual |
Manual |
No Process |
No Process |
| 1 |
Internal
Collection |
Periodic
BOM
Scrubbing |
Manual |
Manual |
No Process |
No Process |
| 2 |
Multiple
External
Sources |
BOM/AVL
Matching |
Available
Alternative
Data |
Workflow |
Manual
Repeatable
Process |
No Process |
| 3 |
Single
External
Source |
BOM/AVL
Intelligent
Matching |
Alternative
Data with
Event |
Workflow |
Workflow
Driven
Process |
Defined
Process |
Figure 3: The Component Event Management Maturity Matrix
Source: Tech-Clarity
New business processes are most effectively adopted in association with enabling
technology. Leading companies are increasingly turning to software applications to drive
changes to the way they do business. Because identifying and reacting to Component
Events has become so time-critical, new applications have emerged that are aimed at
providing faster recognition of component-related design problems, quicker reaction time
to the changes, and compressed resolution times. This need has resulted in the creation
of Component Event Management software applications.
Component Event Management software is complementary to current Product Data
Management (PDM) and Product Lifecycle Management (PLM) applications, adding
additional information and event management capabilities to better manage the
component lifecycle. There are two key aspects that make Component Event
Management different than PDM. The first is the concept of an “event”. Component
Event Management ties actions around externally driven events that must be addressed in
a timely manner to avoid significant costs. The second is context. While PDM systems
will likely contain electronic component part information, the information that is stored is
only the information that is relevant to the company in the way the component is
currently used in the business. A Component Event Management system will contain a
broader set of information about the component, information such as substitute
components, alternate sources of supply, RoHS and hazardous substance compliance
informaton, and detailed specification information not typically required until a Component
Event occurs. A significant amount of Component Events have already begun to impact
component consumers with an acceleration well expected well into 2006. In addition, the
Component Event Management system will contain information about many more
components than a typical company will have in use at any time, providing ready access to
alternates parts and manufacturers.
Figure 4: Component Event Management Complements ERP/PLM/PDM
Source: PCNalert
Recommendations
- Companies that have electronic components included in their products should
view Component Event Management as a strategy for overall business process
improvement, and include it in their PLM Strategy
- Examine component lifecycles before components are included in new designs
- Routinely review and monitor older products for component events
- Component lifecycle events happen frequently, include component lifecycle
analysis at all phases of the product lifecycle
- Integrate Component Event Management with existing PLM systems
- PLM vendors that focus on markets that rely on electronic components should
look for ways to offer Component Event Management
- Companies that are attempting to move more than one level up the Component
Event Management Maturity Matrix with a Component Event Management
initiative will need to pay more attention to change management issues, may
require more outside assistance, and are more reliant on technology enablement of
the new business processes
Conclusion
The key challenges in dealing with the disconnect between product and component
lifecycles are having the time to react, and having the right tools to react rapidly. As
design windows continue to shrink, this is a bigger challenge. With time, the company
has more options and can reduce the costs and other impacts of unmanaged change. Many
companies are now taking the time to improve processes and to position themselves for growth.
Managing component changes and the impact on associated product lifecycles is an area that
is ripe for process improvement to position companies to take advantage of the recovery
without having to hire additional resources because of improved efficiency and reduced
disruption from better management of component lifecycles.
About the Author
Jim Brown has over 15 years of experience in management consulting and application
software focused on the manufacturing industries. Jim is a recognized expert in software
solutions for manufacturing and has broad experience in applying enterprise applications
such as Product Lifecycle Management, Supply Chain Management, ERP and CRM to
improve business performance. Jim is a frequent author and speaker on applying
software technology to achieve tangible business benefits, and serves as the PLM
Specialist for Technology Evaluation and the related PLM Evaluation Center.
Contents
- Executive Overview
- Contents
- Product and Component Lifecycles - The Disconnect
- The Impact of Component Events
- The Fuses Have Been Lit
- The Windows of Opportunity Are Closing
- Enter Component Event Management
- Implementing Component Event Management
- Recommendations
- Conclusion
- About the Author