A part total cost of ownership model for long life cycle electronic systems

Dedicated part selection and management groups within large original equipment manufacturers are responsible for various tasks involved with managing parts or components used in electronic systems. The tasks range from part adoption to obsolescence management and include numerous assembly and support activities that are performed on a regular basis. Long life cycle electronic systems typically utilise commercial 'off-the shelf' parts, which subject them to the same supply chain constraints imposed by a market that is oriented towards short-term, high-volume products. Relevant issues involve a high frequency of part procurement obsolescence, reliability concerns, and the risk of long-term supply-chain disruptions. Unfortunately, initial part selection decisions are often driven by procurement management processes with little or no insight into the total cost of ownership (TCO) of the part's adoption and use within the organisation. The part TCO model proposed in this article enables better informed part selection and management decisions. The article discusses and demonstrates the model's use in Lifetime Buy and Design Reuse case studies for an example surface-mount electronic part. Additionally, the model proposed in this article is well suited for addressing the impacts of part number reduction, retirement of parts from databases, organisational adoption of new parts, sourcing strategies and part-specific long-term supply chain disruptions by influencing initial component selection and providing guidance on what actions taken at the component management level provide the maximum payback (or maximum future cost avoidance).