Planned Obsolescence: Contain the High Cost of Outdated Equipment
Guest blog by MHI member FORTNA
Most supply chain leaders recognize the warning signs of aging systems. A sorter that jams twice a week. Software that relies on manual data entry. Outdated warehouse technology that slows throughput. These aren’t minor inconveniences. They’re signals that equipment is nearing end-of-life, and costs will grow the longer they’re ignored.
Competitive companies don’t wait for failure. They treat obsolescence as a strategy by building the business case early, planning replacements in advance and investing before disruptions hit.
What is planned obsolescence?
It isn’t just a financial concept, but the reality is that every piece of equipment has an expiration date. High-capacity sorters or automated storage and retrieval systems (AS/RS) typically last 10 to 15 years. For software, the window can be even shorter.
Running systems beyond their expected lifecycle may keep them operational, but it drives up maintenance costs, makes spare parts scarce and exposes operations to sudden failures. A sorter may still work after 15 years, but reliability and efficiency are no longer guaranteed. At that point, “it still works” becomes a liability.
Companies don’t care if systems are outdated. They care that their orders ship on time. That’s why planned obsolescence needs to be part of the conversation from the beginning.
Financial priorities
Planned obsolescence is both an operational and financial issue. Two key drivers:
• Tax depreciation: capturing full value of investments.
• Useful life: knowing when maintenance no longer ensures reliability.
Together, these shape the total cost of ownership. Leaders who plan avoid emergencies, stabilize costs and protect performance.
The cost of outdated systems
Ignoring equipment lifecycle creates a ripple effect across the warehouse:
• Downtime: High-throughput facilities can lose six figures per hour, and in some cases hundreds of thousands of dollars per day, when systems fail.
• Manual workarounds: Reduced productivity and rising labor costs.
• Data limitations: No real-time visibility, making decisions reactive.
• Customer satisfaction: Fulfillment delays and errors erode customer loyalty.
Why the conversation has shifted
Historically, leaders rarely discussed the concept of planned obsolescence. Most ran systems until they failed and replaced them reactively. That approach no longer works because automation is too critical today.
At a recent industry event, senior executives from major retailers shared perspectives on disruption, workforce challenges and technology investment. What began as a conversation about building flexibility shifted to planned obsolescence, and they agreed: waiting for equipment to fail isn’t an option. End-of-life planning must be part of every capital project.
“We can’t treat automation as a one-time investment to be maintained long-term. We’re now talking openly about equipment end-of-life from day one, so replacements don’t become unexpected disruptions later.” – Chief Supply Chain Officer, Top Retailer
When waiting costs more
Organizations that stretch systems past their useful life often spend more on hidden costs, including sourcing spare parts from third-party vendors, retrofitting software and reacting to breakdowns. The approach to obsolescence varies by operation size:
• Smaller operations (<30,000 cartons/day): often push equipment beyond its lifespan and compensate with labor.
• Mid-sized operations: gather data to justify the investment.
• High-volume operations (>100,000 cartons/day): build redundancy and replacement strategies upfront because downtime is catastrophic.
One global apparel company learned this the hard way when they acquired a top menswear brand who still had a 25-year-old sorter in service. Sorters have a lifespan of 10-15 years, and they spent $1.5 million on replacement parts. Despite the investment, the system required two daily shutdowns to prevent overheating and breakdowns. This resulted in two hours of lost productivity each day. In the end, millions of dollars were spent, but they still paid the price in daily downtime.
Building a business case leadership will support
Securing capital before failure requires data-backed analysis. Strong cases highlight:
• Downtime: Track outages and cost per hour.
• Lost sales: Tie missed service-level agreement (SLA) targets to revenue loss.
• Spare parts: Note delays and stock-out rates.
• Maintenance costs: Compare repair bills to the cost of new equipment.
If annual repair costs hit 50-70% of replacement, the decision is clear. Think of it as insurance because no one waits for a fire to buy coverage.
Why does planned obsolescence matter now?
Automation is the backbone of modern operations, and failures have immediate impact. That’s why forward-thinking leaders are building obsolescence into total cost of ownership models. Risks vary by industry:
• Retail: Disrupts replenishment and leads to lost sales.
• Industrial: Production delays and supply reliability issues.
• Life Sciences: Regulatory risks or patient safety concerns
• Food and Beverage: Spoilage and wasted products.
• Aftermarket Parts: Missed same-day expectations equals lost business.
Across industries, outdated systems cost more than replacements. Modern automation protects SLAs, reduces risk and improves flexibility.
The role of lifecycle services
Managing obsolescence is easier with lifecycle services that extend the useful life and provide planning visibility. Instead of reacting to breakdowns, these programs keep systems running while planning for future investment.
Effective lifecycle services include:
• Preventive and corrective maintenance
• On-site technicians
• Spare parts management
• Software upgrades
• Health checks and audits
A disciplined lifecycle approach can reduce total cost of ownership from 3–5% of OpEx to 1–2%, while ensuring obsolescence is part of the long-term strategy. Those benefits start with asking the right questions.
Questions executives should be asking
Obsolescence planning begins with visibility. Leaders should ask:
- Which systems would cause immediate disruption if they failed?
- Where are these assets in their lifecycle?
- How much downtime has been recorded in the past year, and at what cost?
- Do systems provide real-time tracking, or still rely on manual data entry?
- Is there a long-term replacement strategy in place?
Planned obsolescence as a competitive strategy
Planned obsolescence isn’t a problem to avoid, but it’s the new reality. Leaders who embrace this mindset gain faster, more reliable fulfillment and the ability to scale. Those who resist are left scrambling with costly downtime and manual workarounds.
Smart executives are building it into lifecycle planning today. It protects performance, controls costs and strengths competitiveness when disruption strikes.
