Procurement and supply chain professionals working at large OEMs must constantly monitor their sourcing and logistics networks for potential delays, disruptions, shortages, price hikes and other risks that could impact their firms’ revenue and profitability. Yet managers at many large companies routinely accept a costly inefficiency in their procurement strategies: the practice of buying and holding large inventories of legacy parts that are subject to being discontinued yet must be kept available to support customers and honor warranties.
Anyone working in procurement for an OEM in automotive, heavy equipment, aerospace, defense, IT equipment, and other manufacturing industries is familiar with this problem. Customers — whether businesses, governments, institutions, or individuals — who buy vehicles, excavators, planes, weapon systems, servers, or other costly assets are entitled to support from their OEM for many years, even decades. However, the rapid innovation and short product lifecycles in today’s global markets make supplier firms regularly adjust and trim their business lines, often eliminating the very parts that an OEM needs to meet the repair and maintenance needs of long-term customers.
An OEM has little choice but to procure large quantities of crucial parts before suppliers phase them out. Then they must track and manage inventories of these “lifetime buys” for many years. If they run short, they must find and qualify a new supplier. The scale of the challenge can be seen in the U.S. Department of Defense’s practices for coping with diminishing manufacturing sources and material shortages (DMSMS). To keep large and expensive weapon systems operational for decades, the DOD and its contractors vigilantly monitor thousands of supplier firms to identify parts that are in danger of being discontinued. Running out of an inexpensive connector, valve, or switch could obstruct a vital mission or undermine the country’s ability to deploy and support its forces.
For obvious security reasons, the DOD does not disclose a great deal about its DMSMS programs. Private sector firms do not break out how much inventory includes legacy parts and supplies purchased to support customers’ long-term repair and maintenance needs. Having been a procurement manager for large tech firms and CEO of the supply chain visibility and risk management firm Resilinc, I know that the value of end-of-life parts held by a large OEM in a capital-intensive industry can amount to tens of millions of dollars.
This type of inventory does not have asset value like the parts and materials an OEM stocks to build products and generate revenue. Instead, legacy parts represent an ongoing source of costs, not just for the lifetime buy, but also for storage, inventory management, and fulfillment. Companies often store legacy parts in a limited number of locations, creating significant costs and environmental impact from shipping to customers worldwide.
3D Printing to the Rescue?
For several years, firms and organizations have tried to use 3D printing to produce legacy parts instead of stockpiling them or commissioning expensive CNC machining, injection molding, and other methods. For example, the U.S. Marine Corps has a program to print some of its critical spare parts.
Yet the obstacles to using 3D printing for legacy parts is daunting. Even experienced product development and engineering teams who use 3D printing to commission prototypes find it difficult to procure legacy parts from 3D printing vendors. They discover that determining which 3D printer technologies and vendors can meet their technical requirements is a complex problem. While it is true that 3D printing technology is improving and expanding at an astonishing rate, this trend further complicates the challenge by producing more options for procurement teams to consider.
Firms in life sciences, aerospace, and other quality-sensitive industries face additional hurdles because any new supplier must undergo lengthy qualification processes. When technical and quality specs can be met with assurance, procurement teams still face the challenge of making a solid business case for 3D printing legacy parts. It is especially challenging to make realistic ROI calculations that compare this method with a lifetime purchase from a traditional manufacturer, including the subsequent storage and logistics costs.
This vast and multiplying array of variables has been too complex for human procurement professionals to navigate. But now, there’s an AI solution available.
Bindiya Vakil is Accio3D’s Founder and CEO
