Obsolescence

Any product or service you purchase has a useful life. After that, the value of continuing to use it declines until it makes sense to move to something more modern. The most common example of this is computers. Software becomes outdated at a regular pace as new hardware is developed. New programs are written with greater capabilities, rendering the incumbent program irrelevant. Companies that continue to use the aged software often find themselves operating at a competitive disadvantage.

The same principle holds true in physical products as well as in services. At one time, the Pony Express was the cutting-edge way to get mail across the country. Now, messages can be transmitted instantly.

Obsolescence happens every day in the business world. Databases become too big for the current hardware to handle. Machines can’t deliver the tight tolerances required in modern manufacturing. Product designs lose favor with customers as new designs come out.

Obsolescence happens for a variety of reasons. Understanding why something goes obsolete helps limit the impact of its declining usefulness it in the next iteration. If you know that the data demands swamped your computers, and you know your data growth patterns, you can plan to delay the obsolescence of your new hardware.

Often, obsolescence comes as a surprise. MP3’s started the compact disk on the path to obsolescence. Think about how at least a few decision makers in the recording industry probably viewed the first fragile, bulky, hard to operate MP3 players. There was probably at least some degree of denial going on. They didn’t see MP3’s as a profitable alternative to CDs, so they avoided the issue until it could no longer be ignored.

Processes can also become obsolete. A way you do something may suddenly become obsolete as technology advances. Fax machines are being used less and less frequently. Paper storage is slowly giving way to electronic storage. E-mails have dramatically changed how telephones are used. Voicemail has replaced, for the most part, “While you were out” pads.

Reasons for Obsolescence

1. Changing technology. Car phones have been replaced, in turn, by handheld cell phones and, more recently, smartphones.
2. Changing customer preference. The beehive haircut is mostly gone.
3. Changing manufacturing practices. New processes make old processes obsolete.
4. Changing operating environment. City water systems have made septic tanks nearly obsolete except in rural areas. Shifts to global marketplaces have made door-to-door sales cost ineffective for most physical products.

How Lean Helps with Obsolescence

A strong continuous improvement program helps manage obsolescence in a few ways.

1. Process focus. Companies that are well-versed in CI tend to have strong processes in place for more things than the typical company. One such thing is the product retirement process. It is a natural part of the product life cycle and should be planned for.
2. Inventory management. Just-in-time production means low levels of inventory. When a product suddenly stops selling, you won’t be caught sitting on a pile of worthless material.
3. Responsiveness to change. Being used to change means people are less resistant to change. When the writing is on the wall about a product’s demise, a Lean company is more likely to commit to reality sooner.