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A Cost Estimating Framework for Materials Obsolescence in Product-Service Systems

Life Cycle Cost Track

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Obsolescence happens when a component becomes no longer available from stock of own spares or being procurable or produced by its supplier or manufacturer. This is an issue that will definitely affect long-life support systems. The rapid change in technology during the last few decades has exacerbated this problem, especially for EEE (electronics, electromechanical and electrical) components, as their life-cycle is becoming increasingly shorter. This is the reason why most of the research on obsolescence carried out so far has been focused on dealing with EEE components obsolescence. However, the impact that obsolescence will have on materials for the structural and mechanical components of the system should not be disregarded. Materials are frequently becoming obsolete due to new regulations from the government related to the environment and health safety. Another reason is that during the support phase, little amounts of material with unique specifications are required, and hence, the suppliers stop producing them as this is not profitable.
The defence and aerospace sector is well known for having to support systems for many decades. The defence budget has being squeezed over the last few years, and this is triggering a search for the most cost-effective solutions to the military needs. Therefore, the contracting model for the life-cycle of these systems is moving towards new types of agreement such as availability contracts, which is a form of Product-Service Systems (PSS), where the prime contractor is in charge of supporting the system and assuming responsibility for new risks derived from it. Obsolescence is one of those risks, and hence, it is necessary to accurately estimate its cost at the bidding stage, so it can be included in the contract.
This paper describes a cost estimating framework for materials obsolescence within a PSS environment. The framework is based on a set of concepts developed out of combining a literature review and information gathered from industry. Those concepts are namely the materials/components complexity levels, the materials/components criticality levels and the materials obsolescence cost metrics. For the aerospace industry, the cost metrics are developed by applying the Analytic Hierarchy Process (AHP) in order to assess the relative weight of each parameter that defines an obsolescence issue, and subsequently calibrating it with historical data. The methodology for the usage of this framework is divided into five steps, and the framework is designed with the flexibility required to provide a cost estimate based on whichever level of information is available. The framework has been customized for ammunition and air platforms. Four industrial experts from the defence sector have participated on the validation of this framework.


Francisco Romero
Cranfield University
Francisco J. Romero Rojo is currently working on his Ph.D. dissertation at Cranfield University. He obtained his five-year degree in Industrial Engineering (Ingeniero Superior Industrial), with specialisation in Industrial Organization (Organización Industrial), from the Technical University of Madrid (Universidad Politécnica de Madrid, UPM), Spain, in 2007. Subsequently, he obtained his MSc degree in Knowledge Management for Enterprise Development from Cranfield University, UK, in 2008.
His current research interests include system obsolescence management, system obsolescence costing, product service systems and whole life cycle costing.

Rajkumar Roy
Cranfield University
Professor Rajkumar Roy led Competitive Design research at Cranfield for over ten years before promotion to Head of Manufacturing Department in 2009. Competitive Design is a fact based approach to study whole life of technology intensive products and services and optimise their design, along with efficient design information and knowledge management.
Professor Roy is known for his qualitative cost modelling, requirements management and design optimisation research and has published over 20 Journals and 100 conference papers. He is currently the Principal Investigator of three Product-Service System (PSS) projects (IMRC and EPSRC funded) in the areas of whole life cost and service knowledge capture. He is also the Principal Investigator of an IMRC funded Network of Excellence in Affordability Engineering. BAE Systems is a major sponsor of his research along with Airbus, Rolls Royce, MoD, BOC Edwards, Nissan and Ford Motor Company. He is currently leading the new initiative on Competitive Creative Design at Cranfield and collaboration with University of the Arts London, and has also developed an innovative PSS Futures Lab at Cranfield.
Professor Roy has a PhD in design optimisation using soft computing techniques. Before that he completed formal postgraduate education on intelligent systems and production engineering. He is a Chartered Engineer and the President of the Association of Cost Engineers (AcostE), a member of IEEE, IED and the Institution of Engineers (India). He has also been an Associate Member of CIRP over 3 years. Professor Roy is the Editor in Chief of the Applied Soft Computing journal from Elsevier.

Essam Shehab
Cranfield University
Dr. Essam Shehab is a Senior Lecturer in Decision Engineering and is leading cost engineering research at Cranfield University. Furthermore he has an academic, research and industrial background in product-service systems and knowledge-based decision support. Dr. Shehab is the Principal Investigator of four EPSRC/industry studentships for PhD and EngD and a Knowledge Transfer Partnership (KTP) project. He is co-investigator of whole life cost of product-service system (PSS-Cost), PSS-Service Delivery Systems and PSS-Design projects, EU FP7 project on lean product and process development and academic supervisor of e-service and service design projects. He has developed a strong track record of applied research with a number of companies including Airbus, Rolls-Royce, BAE SYSTEMS, Lockheed Martin, Lotus Cars and Cosworth. Dr. Shehab has also successfully completed the supervision of four PhD students and 50 MSc. Theses and one KTP project. He has published over 60 Journal and Conference papers in his areas of expertise. Dr. Shehab is a Fellow of the Higher Education Academy, a member of both the Engineering and Manufacture Committee (EMC) of ACostE and the Institute of Engineering and Technology (IET).

Kalyan Cheruvu
Cranfield University
Dr. Kalyan S Cheruvu is a Research Fellow and Project manager in Decision Engineering Center, Manufacturing Department at Cranfield University. Furthermore he has an academic, research and industrial background in product design and development. He is Project Manager of whole life cost of product-service system (PSS-Cost) project. He has developed good relations with BAE SYSTEMS, Rolls-Royce, Lockheed Martin, BVT fleet, Metronet, and Ministry of Defence, UK. Dr. Cheruvu is also supporting four PhD researchers in PSS-Cost project. He has published over 16 Journal and Conference papers in his areas of expertise. Dr. Cheruvu is an Associate Member of Association of Cost Engineers (ACostE).