The Engineering Economist, Vol. 51, No. 2, pp. 115-139, April-June 2006 1 OBSOLESCENCE DRIVEN DESIGN REFRESH PLANNING FOR SUSTAINMENT- DOMINATED SYSTEMS Pameet Singh Peter Sandborn CALCE Electronic Products and Systems Center Department of Mechanical Engineering University of Maryland, College Park, MD, USA Many technologies have lifecycles that are shorter than the lifecycle of the product they are in. Lifecycle mismatches caused by the obsolescence of technology (and particularly the obsolescence of electronic parts) results in high sustainment costs for long field life systems, e.g., avionics and military systems. This paper presents a methodology for performing optimum design refresh planning for sustainment-dominated electronic systems based on forecasted technology obsolescence and a mix of obsolescence mitigation approaches ranging from lifetime buys to part substitution. The methodology minimizes the lifecycle cost by determining the optimum combination of design refresh schedule for the system (i.e., when to design refresh) and the design refresh content for each of the scheduled design refreshes. The analysis methodology can be used to generate application-specific economic justifications for design refresh approaches to obsolescence management. In the normal course of product development, it often becomes necessary to change the design of products and systems consistent with shifts in demand and with changes in the availability of the materials and components from which they are manufactured. When the content of the system is technological in nature, the short product lifecycle associated with fast moving technology changes becomes both a problem and an opportunity for manufacturers and systems integrators. For most high-volume, consumer oriented products and systems, the rapid rate of technology change translates into a critical need to stay on the leading edge of technology. These product sectors must adapt the newest materials, components, and processes in order to prevent loss of their market share to competitors. For leading-edge products, updating the design of a product or system is a question of balancing the risks of investing resources in new, potentially immature technologies against potential functional or performance gains that could differentiate them from their competitors in the market. Examples of leading-edge products that race to adapt to the newest technology are high-volume consumer oriented electronics, e.g., mobile phones and PDAs. There are however, significant product sectors that find it difficult to adopt leading edge technology. Examples include: airplanes, ships, traffic lights, computer networks for air traffic control and power grid management, industrial equipment, and medical equipment. These product sectors often “lag” the technology wave because of the high costs and/or long times associated with technology insertion and design refresh. Many of these product sectors involve “safety critical” systems where lengthy and expensive qualification/certification cycles may be required even for minor design changes and where systems are fielded (and must be maintained) for long periods of time (often 20 years or more). Many of these product sectors also share the common attribute of being “sustainment-dominated”, i.e., their long-term sustainment (lifecycle) costs exceed the original procurement costs for the system. In this paper, sustainment refers to all activities necessary to: 1 • Keep an existing system operational (able to successfully complete its intended purpose), • Continue to manufacture and field versions of the system that satisfy the original requirements • Manufacture and field revised versions of the system that satisfy evolving requirements. A significant problem facing many “high-tech” sustainment-dominated systems is technology obsolescence, and no technology typifies the problem more than electronic part obsolescence, 2 where electronic parts refers to integrated circuits and discrete passive components. In the past several decades, electronic technology has advanced rapidly causing electronic components to have a shortened procurement life span. Industry experts estimated that over 200,000 electronic components from over 100 manufacturers had become obsolete by the end 2003 (Texas Instruments 2003). Driven by the consumer electronics product sector, newer and better electronic components are being introduced frequently, rendering older components obsolete. Yet, sustainment-dominated systems such as aircraft avionics are often produced for many years and sustained for decades. Sustainment-dominated products particularly suffer the consequences of electronic part obsolescence because they have no control over their electronic part supply chain due to their low production volumes. This problem is especially prevalent in avionics and military systems, where systems often encounter obsolescence problems before they are fielded and always