Optimizing Lifetime Buy Quantities to Minimize Lifecycle Cost

Abstract

Mismatches between electronic part procurement lifecycles and the lifecycles of the products they are used in causes products with long manufacturing and/or support lives to suffer from significant obsolescence management costs. Lifetime buy is a prevalent mitigation approach employed for electronic part obsolescence management. Making lifetime purchases of parts upon obsolescence involves managing interacting influences and concurrent buys for multiple parts in a sequential manner. This thesis is focused on optimizing lifetime buy quantities by minimizing lifecycle cost.

The Life of Type Evaluation (LOTE) tool was created to optimize lifetime buy quantities. LOTE requires component and system data and expected demand information. With the given data, LOTE uses stochastic analysis to determine the lifetime buy quantity per part that minimizes the lifecycle cost for the system.

Results from a LOTE analysis of a Motorola communication system indicate that organizations may be systematically overbuying at lifetime buys giving inventory shortage penalties a greater emphasis than other hidden costs.