This post will discuss about important aspects of Obsolescence like What is Obsolescence, How it happens, Why it is so critical, & its types. When a product is no longer desirable because it has gone out of the popular fashion, its style is obsolete. One example is flared leg jeans; although this article of clothing may still be perfectly functional, it is no longer desirable because style trends have moved away from the flared leg cut. Planned obsolescence became a part of school curriculums, taught in design and engineering schools as a means of promoting frequent purchases and as part of a strategy to create a successful business. But by the 1920s, most people owned a car and no one needed a new one.
What Is Obsolescence Risk?
This type of “value-add” effort usually has a positive impact on the property’s market value. There has been growing concern among automakers about the functional obsolescence of internal combustion engine (ICE) vehicles. As more and more countries and cities are pushing towards electric vehicles and implementing stricter emission standards, ICE vehicles are becoming less competitive and desirable. This is an example of functional economic obsolescence due to changes in market demand and government regulations. Suppose a company, Amacon Ltd., produces a line of prevalent smartphones among consumers but needs the latest technology, such as 5G connectivity, larger screens, or better cameras. As a result, customers may see these smartphones as less desirable over time and turn to other brands.
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Saponification is also a step in biodiesel production, where fats are converted into fatty acid methyl esters (biodiesel) and glycerol. Sodium hydroxide (NaOH), commonly known as lye or caustic soda, is a strong base that reacts with fats in a process known as saponification. This chemical reaction is fundamental in soap-making and has various industrial applications.
Economic obsolescence – sometimes called external obsolescence – is the depreciation in the market value of a property due to external factors that cannot be controlled by the owner. The stock market “graveyards” are littered with dead companies whose products or technology were rendered obsolete. Examples are the technology companies Control Data and Digital Equipment from Morgan Stanley’s 1982 “recommended” buy list. Budgeting for obsolescence risk is challenging because it is difficult to predict obsolescence and the exact rate of technological innovation. Retailers have the same problem as manufacturers only with their inventory.
- A new property owner could purchase a 1970s office building at a good price and invest a certain sum of money into updates to bring the building to current-day standards.
- And many companies are taking the step towards circularity and creating higher-quality, longer-lasting products, offering repair services, or creating a platform where they can sell their products secondhand.
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This poses a serious threat especially for products having larger life span, and therefore requires a focused emphasis on the Obsolescence Management throughout the lifecycle of the product. Failure to manage it will impact life cycle costs, product performance, product availability, maintainability and safety. Sometimes marketers deliberately introduce obsolescence into their product strategy, with the objective of generating long-term sales volume by reducing the time between repeat purchases.
So it’s interesting to learn that in 1939, the first nylon stockings were invented to replace silk stockings and they were nearly indestructible. Everyone wanted to get their hands on them so badly that even riots broke out. Planned obsolescence is a strategy of deliberately ensuring that the current version of a given product will become out of date or useless within a known time period. Functional obsolescence is the reduction of an object’s usefulness or desirability because of an outdated design feature that cannot be easily changed or updated.
Functional Obsolescence is the impairment of a real property’s functional capacity due to changes in market tastes and/or standards. In other words, a property could become functionally obsolete when its design, style, amenities, or technology no longer meet the needs and/or expectations of modern tenants. There are no clearer examples of functional obsolescence than in the realm of technology. Modern tenants require high speed internet connections, strong cellular reception, advanced security features, and modern audio/video capabilities.
Functional Obsolescence: Definition and Examples
New smartphones are able to do more and include more features that make old ones functionally obsolete. For example, before the late 1990s, most households had bulky, heavy tube televisions, with entertainment centers being constructed to accommodate their weight and size. Fast forward to today and most households have low-profile flat-screen televisions, rendering the old entertainment centers functionally obsolete.
Clothing and apparel retailers have the most difficulty with obsolescence. They need to get rid of the inventory before it becomes obsolete and worthless to them. Manufacturers main concern with obsolescence is in their fixed assets or plant assets. Manufacturers spend large amounts of their budgets on machinery what is obsolescence and equipment to help produce products.
One example might be producing an appliance which is deliberately designed to wear out within five years of its purchase, pushing consumers to replace it within five years. Some products become technologically obsolete due to changes in complementary products which results in the function of the first product being made unnecessary. For example, buggy whips became obsolete when people started to travel in cars rather than in horse-drawn buggies. For example, a vehicle driven for years and has accumulated many miles may suffer from physical functional obsolescence due to engine wear and other mechanical problems.
Sure, they could lobby city officials for a change, but the ultimate decision is up to someone else. For example, suppose that a property owner completely ignored their property in almost every way. Over time, a leak developed in the roof, causing water to seep into the walls every time it rained.
