Unplanned Obsolescence

We’re all familiar with the concept of planned obsolescence, but what about unplanned obsolescence. Planned obsolescence is when a product is designed to have only a limited life because it becomes outdated due to loss of functionality, appearance, customer appeal, or perhaps simply wears out. In general, planned obsolescence is somewhat intentional, the idea being that customers will either have to or desire to replace a product when is becomes obsolete.

So what is Unplanned Obsolescence?

While planned obsolescence is something that a seller of a product might find desirable and actually cause intentionally, unplanned obsolescence is neither desirable nor designed into a product, process, procedure, etc.

Some Examples

Imagine you have a manufacturing company. When you purchase production equipment you know that it will naturally have a limited productive lifespan. However, you do not buy it with a desire for that to happen at a particular point in time. In fact, you would prefer to make it last as long as possible and likely would postpone replacing it with something better until such time as absolutely necessary.

Likewise, companies install software packages with the intent that they will serve their needs for a long time. In fact, because of the cost in dollars and time, most companies try to make software last longer even if they have to continue to make minor upgrades to do so.

Both of the above are unplanned obsolescence. That is, a company buys something with the intent that they will try to make it last as long as possible. It is very much like the way many people view their car. Unless they are the type who just likes to buy a new car fairly regularly, they likely buy it with the intention to make it last a long time. They may only be prompted to replace it when either the cost of repairs or the time lost to repairs becomes prohibitive.

So What Does this Mean to Business

The bottom line is that unplanned obsolescence should be kept in mind whenever a business is purchasing something for internal use. Carefully evaluate the intended purchase to determine a realistic expectation as to how long you expect it to provide reliable service.

There is something else to consider as well. When you have an idea as to when you will likely need to replace something, begin to set aside resources to do so. This could be in the form of a sinking fund. See Prepare for a Rainy Day for more in this concept.

Are you taking into consideration unplanned obsolescence when you purchase equipment, software, etc., and are you putting aside resources for when replacement is required?

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.


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