A Cost Savings Model for EOL Service Parts Support, Part I

How does your company manage parts on end-of-life (EOL) platforms? It’s a universal problem that applies to any OEM that is managing a production line and a service parts supply chain.

Let’s say, for example, that your company decides to stop manufacturing an electronic product because you have a newer version coming down the pipeline. As soon as that decision is made, the product goes EOL. But you still have to support the product until the warranty period has expired for the last customer who purchased it. The traditional way to do this is to contact all the manufacturers for the product’s components and open extended last-time buy (LTB) purchase orders for spare parts, often with commitments to buy at a locked-in price point. Does it get the job done? Yes. Could the same job be done less expensively and with less inventory risk? Absolutely.

ReSolve runs a three-tiered component (or assembly) support strategy when it comes to sustaining EOL parts fulfillment programs for our customers. This diverse service parts supply chain enables us to support our customers’ EOL requirements at a significant cost savings over the traditional PO model. Our model looks something like this:

You can see that ReSolve utilizes three different types of service parts sources: We can buy the components; we can buy full systems and harvest parts from them; or for certain commodities, we can engineer generic parts up to a certain specification. In this post we will focus on component-level procurement; we’ll cover engineering and full system procurement in part two.

When it comes to component-level service parts procurement, the best way is to diversify the supply base. Unlike most reverse logistics providers, ReSolve is able to reliably use open market sourcing, thanks to our unparalleled market intelligence. We have a team of global commodity managers with 24/7 visibility into the electronics supply chain. Thus ReSolve is able to react immediately to spikes and fluctuations in overall market supply and demand to procure what our customers need when they need it. Since most parts needed for EOL support will see significant price reductions over a multiyear period due to market depreciation, ReSolve customers are able to take advantage of those savings. You can see the difference between the legacy LTB support price point and the real-time price point for a sample HDD in the chart below.

In addition, ReSolve utilizes state-of-the-art testing and inspection processes on all procurement orders to protect our customers from the threat of substandard parts.

ReSolve also has unique access to franchise procurement – thousands of device manufacturers and OEMs – that we can use to complement our open-market strengths. And yes, ReSolve does make traditional LTBs as well – but only in situations when franchise or open-market channels are not viable options. When you are buying a single-source part, such as the plastic bezel surrounding a computer monitor, traditional LTB procurement may be the only option. But if you’re also buying the computer display itself, over time you may see a cost advantage to purchasing a full system and obtaining the components through parts harvesting and teardown. To learn about ReSolve's full system procurement, along with our engineering services, read part two.