Proceedings of the 2007 Aging Aircraft Conference Lifetime Buy Optimization to Minimize Lifecycle Cost Dan Feng, Pameet Singh, Peter Sandborn CALCE, Department of Mechanical Engineering University of Maryland Abstract Mismatches between electronic part procurement lifecycles and the lifecycles of the products that they are used in cause products with long manufacturing and/or support lives to incur significant obsolescence management costs. Lifetime buy is one of the most prevalent mitigation approaches employed for electronic part obsolescence management. Making lifetime purchases of parts when they go obsolete involves managing many interacting influences and multiple concurrent buys for multiple parts. The focus of this paper is optimizing lifetime buy quantities by minimizing lifecycle cost. There are multiple factors that contribute to the lifecycle cost associated with a lifetime buy: procurement cost, inventory cost, disposal cost, and penalty cost. The Life of Type Evaluation (LOTE) tool was created to optimize lifetime buy quantities and minimize lifecycle cost. LOTE requires component and system data. With the given data, LOTE uses stochastic analysis to determine the lifetime buy quantity per part that minimizes the lifecycle cost for the system. LOTE was used to determine the optimum lifetime buy quantities for a Motorola communications system. Introduction A significant problem facing many “high-tech” sustainment-dominated systems 1 is technology obsolescence, and no technology typifies the problem more than electronic part obsolescence, where electronic part refers to integrated circuits and discrete passive components. 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 relatively 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 during their support life. Many part obsolescence mitigation strategies exist for managing obsolescence once it occurs, including [2]: lifetime buy (also referred to as final order or Life Of Type - LOT buy), last-time buy (also referred to as bridge buy), part replacement, aftermarket sources, emulation, re-engineering, salvage, and design refresh/redesign of the system. The opportunity to make lifetime buys is usually offered by manufacturers of electronic parts prior to part discontinuance (usually in the form of a published “last order date”). Lifetime buys play a role in nearly every electronic part obsolescence management portfolio no matter what other reactive or pro-active strategies are being followed. The management strategy associated with lifetime buys of electronic parts is to determine the number of parts to purchase prior to the last order date. Lifetime buys are risky, as forecasting demand and sparing requirements for potentially 10-20 years into the future is not an exact science, especially in today's dynamic technology and market atmosphere. Lifetime buys also assume that the system design will remain static, which is seldom the case. Even if the product didn’t change and the number of parts needed in the future could be accurately estimated, stockpiling parts for the future may incur significant inventory and financial expenses. In addition, the risk of parts being lost, un-usable when needed, or pilfered by another program, all of which are very real occurrences for electronic part lifetime buys that may need to reside in inventory for 10 years or more, increases the risk associated with the lifetime buys in the inventory. Figure 1 shows an influence diagram associated with lifetime buys of electronic parts. 1 In the context of this paper, “sustainment-dominated” refers to systems whose 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.