Obsolescence refers to products or services that are no longer useful due to changes in the market, such as technological advancements or shifts in social norms. Planned obsolescence is a business strategy used to drive sales. Obsolescence is important to consider in costing, accounting, insurance, and inventory management. It can also affect employability and training in rapidly advancing fields.
Obsolescence is a word that is used to describe a product, service or concept that is functional, but no longer useful due to the changes that have taken place in the market. Technology may have outgrown the product, for example, or changes in education, social norms, and accepted practices may have rendered a service useless. Obsolescence is an ongoing problem with everything from medical education to automobiles.
Technological obsolescence occurs when technology moves fast enough that functional objects become useless because better technology becomes available. Sometimes this happens as a natural byproduct of the tech industry, which is constantly innovating in an effort to improve. In other cases, it may be deliberate. Planned obsolescence is a business strategy used by many companies to drive high volume sales. Cellphones, for example, come out in new models every year, with the aim of forcing people to abandon old models in order to buy new ones.
In costing and accounting, obsolescence is an important issue to consider. When evaluating items, obsolescence is something to consider. Take, for example, a diagnostic device used in the medical field. Once new, the equipment could be extremely expensive. Under normal accounting practices, it would be considered to depreciate each year as a result of use. However, obsolescence can accelerate depreciation, making the equipment less valuable.
This can be important when it comes to taking out insurance policies, filing insurance claims, managing inventory, and so on. In the equipment example above, obsolescence could make the value of that particular appliance very low, when the cost to replace it with an appliance with a similar function can be quite high. Ultrasound machines are a prime example; the technology behind ultrasound is constantly improving, which means that when insuring medical equipment, people have to think not about the cost of replacing a specific unit, but about the cost of buying a new ultrasound machine in general.
Businesses also need to watch out for obsolescence when managing inventory for sale. For example, an electronics store doesn’t want to overorder computers with an older operating system when a new operating system is coming out, because consumers won’t want the older computers. Similarly, stores must manage other items that quickly become obsolete to ensure they don’t run out of stock that can’t be sold.
Obsolescence is also a problem for people and for training. In rapidly advancing fields, people with outdated training may not be employable or may need retraining. For example, a librarian used to card catalogs cannot find work in libraries that use computerized cataloging systems. Similarly, a programmer who knows the programming languages that were in vogue 10 years ago would be overboard in a modern technology company. This is an especially big problem for adults who are trying to get back into the workforce after taking time off.
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