LONDON New research from the Component Obsolescence Group (COG) suggests that problems which could undermine industry’s ability to keep vital long lifespan equipment up and running are moving up the agenda of City analysts who monitor the most ‘at risk’ sectors.
COG’s findings reveal that component obsolescence is recognised by more than half (55%) of the analysts polled as a business risk that companies need to manage effectively.
However, less than a third (30%) factor the issue into their analyses, and only a quarter say companies give them any information on the obsolescence problems they face and how they manage them.
Michael Trenchard, chief executive of COG, said, “While it is encouraging to see that component obsolescence is now featuring on so many analysts’ radars, it’s disappointing that many organisations still do not seem to be actively volunteering information about this issue.
Earlier research conducted by COG found that FTSE100 companies are not reporting on the risks associated with component obsolescence in their annual reports, even though listed companies should review their financial, operational and compliance controls and risk management systems annually, and report to shareholders that they have done so.
“Organisations should provide more information on how they deal with obsolescence in their risk analyses, particularly those in the most vulnerable sectors,” said Trenchard. “They may be unwilling to admit that it affects them at all, but taking a proactive approach should reflect well, rather than badly. It’s how it’s managed that counts.”
The Ministry of Defence Component Obsolescence Resolution Cost Metrics Study conducted by Qinetiq and ARINC suggests that, on average, sourcing a substitute part costs £13,500 and the cost of a major component redesign could be more than £300,000. This does not include any associated costs, such as down-time of equipment.
COG says the problem is likely to get worse because component lifespans are typically now far shorter than in the past, since demand is mainly driven by the more ‘disposable’ consumer goods market, rather than Industry.
Many of the analysts who recognised obsolescence as a business risk said the damage it could do to an organisation’s reputation if not properly managed was likely to be as important, if not even more so, than the significant financial costs which could be incurred. For instance, Tube Lines was recently criticised for resorting to using eBay, the auction website, to source vital spare parts for its equipment.