What’s obsolescence?

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Obsolescence is a word used to describe a product, service, or concept that is functional, but no longer useful due to changes that have occurred in the marketplace. Technology may have outgrown product, for example, or changes in training, social norms, and accepted practices may have rendered a service useless. Obsolescence is an ongoing problem with everything from medical training to automobiles.

Technological obsolescence occurs when technology moves fast enough that functional objects become useless because better technology is available. Sometimes this happens as a natural byproduct of the technology industry, which is constantly coming up with innovations in an attempt to improve. In other cases, it may be deliberate. Planned obsolescence is a business strategy used by many companies to promote high sales volume. Cell phones, for example, come out in new models every year, with the goal of forcing people to ditch old models in order to get new ones.

In costs and accounting, obsolescence is an important issue to consider. When valuing objects, obsolescence is one thing to keep in mind. Take, for example, diagnostic equipment used in the medical field. When new, equipment can be extremely expensive. Under normal accounting practices, it would be considered to be depreciated each year as a result of use. However, obsolescence can accelerate depreciation, making equipment less valuable.

This can be important when it comes to taking out insurance policies, filing insurance claims, managing inventory, etc. In the equipment example above, obsolescence can make the value of that particular piece of equipment very low, when the cost of replacing it with equipment with a similar function can be quite high. Ultrasound machines are a prime example; The technology behind ultrasound imaging is always improving, which means that when insuring medical equipment, people should think not about the cost of replacing a specific unit, but about the cost of buying a new ultrasound machine in general.

Businesses must also watch out for obsolescence when managing inventory for sale. For example, an electronics store doesn’t want to overorder computers with an old operating system when a new operating system is coming out, because consumers won’t want the older computers. Similarly, stores need to manage other items that quickly become obsolete to ensure they don’t end up with unsellable inventory.

Obsolescence is also a problem for people and 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 programming languages ​​that were in vogue 10 years ago would be at sea in a modern technology company. This is an especially big problem for adults trying to get back into the workforce after taking time off.

Smart Asset.

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