MINI CASE STUDY
REDUCE EXCESS & OBSOLESCENCE
Reconfiguration of Excess & Obsolete Products
For companies buying “custom” products, such as PCBA’s or precision sheet metal, excess and/or obsolete (E&O) inventory may be a normal part of business. You’ve done the best you can with forecasting and waited until the last minute to issue your production orders but still you’re left with E&O due to design changes or volatile customer demand. If you're building products with any amount of customization, you generally can't "unbuild them" and return the components to your suppliers for credit. Generally, it's a one-way trip.
However, for custom electro-mechanical assemblies such as industrial controls, power distribution boxes, auxiliary boxes, etc., there may be an alternative to dumping excess or obsolete inventory. There is a chance that many of these types of products can be retrofitted to meet current requirements. Retrofitting or reconfiguring is the process of modifying an existing product into something else.
If your company buys a lot of similar custom products, a retrofit may help you kill two birds by reducing your E&O and fulfilling current demand. If the changes required are as simple as extracting and replacing the sub-components, that costly assembly that’s been collecting dust could be converted to an assembly with demand for a fraction of the cost of buying a new unit. And the lead time to perform the retrofit is often much shorter than buying new.
The potential for pursuing this approach is determined by how similar the excess inventory is to the new demand. The first course of action is to talk to your Engineering department or ask your supplier what "reconfig" options are available. In our experience, if you find that 80+% of material, including the enclosure, are a match, there’s a good chance a retrofit is possible.
If a full retrofit is not a viable solution, all is not lost. In many cases, there are valuable components that can be harvested. The cost to dismantle and extract those components needs to be considered, but if your E&O contains long lead, high value, or critical parts that are still used in the current generation of your products, it may be worth an investigation. If an assembly can be cannibalized for its high value components, you’ll free up some warehouse space, reduce your inventory carrying cost and capture some savings when those piece parts find a new home. So how do you know what’s usable? Talk to your supplier of those assemblies.
Example: In 2019 AMtec helped a capital equipment customer convert (6) excess power distribution boxes into (6) units of a new configuration for 16% of the cost. And where the standard lead time for these power boxes is 8 weeks, the reconfigs were completed in just 2 weeks.