Integrating Technological Obsolesence in Quantitative Forecasting of Memory Device Failure Cost
Résumé
The current approach to estimate the depreciation in the utility of a piece of equipment is to use a single mortality survivor curve over its entire life cycle. This approach has been demonstrated to be inadequate as it has understated the true impact of technological obsolescence. Nowadays, there are so many devices whose utility is very sensitive to technological innovation. For these products, relying on the traditional historical mortality approach simply leads to a gross error in the estimation of life cycle values such as depreciation in their utility or their life cycle cost. This paper contains three distinctive parts. In the first part, the paper presents analogical derivations of various growth curves and the rationale which leads to the establishment of a statistical methodology for determining the retirement rate due to wear and tear, failure by accidents, and/or simply by age related deterioration. Another significant development presented in this first part is the derivation of the obsolescence chart for a given product. The paper goes on to describe a method to combine the impact of both traditional mortality influence and technological influence on the life cycle of the property. The second part of the paper is used to demonstrate the results of the proposed combined quantitative forecasting methodology via a case study which involves the substitution of mechanical memory devices by solid state (flash) memory devices. This paper discusses the importance of combining the effects of mortality and technological obsolescence when conducting an economic forecast.
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