Modeling sourcing strategies to mitigate part obsolescence

Part obsolescence is a common problem across industries, from avionics and military sectors to most original equipment manufacturers serving industrial markets. When a part supplier announces that a part will become obsolete, the OEM can choose from a number of sourcing options. In practice, the three most commonly adopted mitigation strategies are: (1) a lifetime, or life-of-type (LOT), buy from the original supplier; (2) part substitution, which finds a suitable alternative; and (3) line redesign, which modifies the production line to accommodate a new part. We first develop a framework incorporating fixed cost, variable cost, leadtime, demand uncertainty and the discount rate to directly compare and characterize these three sourcing strategies in a static context. We next formulate an integrated sourcing approach that starts with a bridge buy and may continue with part substitution or line redesign when the originals parts are depleted. Through numerical studies, we identify the joint impact of the problem parameters on the static and integrated sourcing strategies and the optimal choice among them. While the integrated sourcing approach outperforms the static ones in many cases it is not a dominant strategy.