Detailed Study - Supplier and Customer Management / Drafting of Contracts

18 Jun 2012
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A comprehensive obsolescence management includes management of contracts. Suitable obsolescence management clauses on both sides of the supply chain with suppliers and customers are needed. Here is an example clause according to the “SD-22 - Diminishing Manufacturing Sources and Material Shortages (DMSMS) Guidebook,” published by the Defense Standardization Program Office (DSPO):

“The Contractor is responsible for managing obsolescence over the entire period of the contract, and notwithstanding any obsolescence issues or problems, the Contractor remains responsible for meeting all performance and other requirements of this contract. […] The Contractor shall prevent any additional costs […| The contractor shall provide […| with obsolescence status briefs, as part of the periodic program reviews provided for under the contract.”

On the supply side, contracts ensure that information such as PCNs (Product Change Notifications) and PDNs (Product Discontinuance Notifications) reach the organization in a timely manner. Moreover, contractual policies can ensure that in the case of part obsolescence, the supplier has to take responsibility to solve a problem.

On the customer side, contracts can protect from assuming the whole responsibility of obsolescence. Contracts for long-term delivery should only be signed when additional costs for resolving obsolescence problems are excluded.

Methods of detailed obsolescence management contract study include:

  • Analysis of contracts
  • Classification of contracts on the supplier side and the customer side
  • Analysis of existing responsibility clauses about obsolescence

 

example-suppl1

 

Source: Bartels, Ermel, Sandborn and Pecht; “Strategies to the Prediction, Mitigation and Management of Product Obsolescence”

The result of a obsolescence management contract study measures the Key Performance Indicators “% of Obsolescence Clauses in Enforceable Contracts“ and “Derived Target-Actual-Costs” including

  • Illustration of existing problems
  • Present the potential of revisions
  • Support potential in drafting of contracts and contract re-negotiation, if necessary

example-suppl2

Last modified on Wednesday, 04 July 2012 12:02
Bjoern Bartels

Bjoern Bartels is a senior consultant and obsolescence management competence lead at ABSC and Managing Director of AMSYS. He has a masters degree in international business and a German diploma in industrial engineering and business management. He has been working with comprehensive obsolescence management practices and methods for several years. He successfully developed, implemented and managed reactive, proactive and strategic obsolescence management systems within companies. In addition, he is the head author of the publication "Strategies to the Prediction, Mitigation and Management of Product Obsolescence", a joint work with the CALCE Engineering Institute of the University of Maryland. 

We create customized and innovative obsolescence management concepts and provides competent, reliable and sustainable optimization of processes, projects and infrastructure. We support businesses as long-term partner for the definition and implementation of customer specific complete obsolescence management solutions and round off their range of services with specific seminars and events.

Website: am-sys.com/en/home/

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