By Arun Sivasankaran
With embedded board and system OEMs increasingly coming around to the fact that product pruning makes sound business sense, California-based GDCA, a company that specializes in legacy equipment manufacturing of obsolete embedded computer equipment, has found new opportunities coming its way faster than ever before.
The 33-year old company, which serves as a legacy equipment manufacturer and a second source of supply for more than 2,500 companies worldwide, recently extended its manufacturing license deal with Radisys, a company that provides open telecom and compute solutions. As part of the agreement that indefinitely extends the life of its legacy products, Radisys has transferred over 300 previously end-of-life COM Express and ATCA product lines to GDCA.
GDCA’s PLM+ methodology provides long-term customer support and sustainment for end-of-life COTS and custom embedded computer boards and systems. The company uses OEM-authorized intellectual property to offer legacy manufacturing, lifecycle planning, lifecycle assurance and legacy engineering.
“Over the last three decades, we have worked with a lot of OEMs such as Curtiss-Wright and Kontron, but on an ad-hoc basis,” said Siku Thomason, GDCA Marketing Manager. “Our partnership with Radisys is not about transferring this problem product or that problem product; it is about strategically unloading products to us, a legal equipment manufacturer. Radisys is the first OEM that is moving into a full outsourced integrated sustainment practice.”
Ethan Plotkin, GDCA CEO, believes that the Radisys model is worth emulating for other OEMs. “It is a bold move, providing customers with access to parts indefinitely — it’s unheard of in the industry today,” he says.
Old product designs bog down OEMs that are focused on introducing new product introduction ad active products, Plotkin told attendees at the recent Embedded Tech Trends 2020 in Atlanta. OEMs can save money if they manage to optimize the way they deal with old designs, he said.
“Sustainment slog happens over and over again in our industry,” said Plotkin. “In response to the reality that nobody can produce every product that they have ever introduced, the industry has taken to the practice of basically end of life-ing old designs and offering last time buys to customers. Unfortunately, last time buys do not necessarily work for a lot of customers,” he said.
Product pruning increases profitability of OEMs, said Plotkin, who referred to the 80-20 rule to drive home his point. “Eighty percent of revenue for companies comes from 20 % SKUs. Twenty-five per cent of the overhead delivers 89% of the sales. The next 25% gives 7% more of sales while the third 25 % of overhead delivers 3 % of the sales. It takes the last 25 % of overhead to deliver the bottom of the barrel 1 percent of the sales. People need to understand that there is an opportunity for them to make zero-effort profit on a least the bottom one per cent of their sales.
Tying up with a sustainment company for old product designs works to the benefit of OEMs, said Plotkin. “A few years ago, we started working with medium to large size OEMs. In the time that we have been working with them, they have been able to improve their new product introduction, their on-time performance and their earnings while realizing quarter-to quarter growth over several consecutive quarters. There is an alternative out there to the enormous distraction and overhead costs of dealing with dwindling demand for old product designs.”
“We recognize that there are more people moving into this space,” says Thomson. “It is because obsolescence is becoming a firestorm in the belly of a lot of operations. Obsolescence is really real. Based on how technology is progressing, it could be every two to three months that a new component is on the market. There are going to be a lot of old product designs. Getting the word out on how to manage obsolescence is a big part of what we are doing.”
The company is looking at expanding into Asia, said Thomason. “We have mostly had a lot of our success in North America and Europe, but we have had customers all over the world requesting our boards. A lot of legacy application equipment ends up in developing territories. They are often pushed into the grey market or black market to find spares or replacement parts, or for repairs. We can make sure that they have a safe way to procure parts.”
Thomason believes legacy equipment manufacturers are set to become an even integral part of the ecosystem. “I think see us being integrated into more OEM as just a business as usual process. That term LEM; you are going to hear that a lot more of it. Not everyone recognizes the work that we do; it is not very sexy. But there is a lot of innovation happening in sustainment.”
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