Collapse of the product life cycle

The product life cycle theory, established 45 years ago, asserts that all products have a limited life and pass through distinct stages, each posing different challenges, opportunities, and problems to the business.

One of the most profound changes in the last decade is the dramatic shrinkage and some would argue collapse of product life cycles[1] which bear little resemblance to the world today which is defined by instant obsolescence. In some fast moving industries, this can even occur during the growth phase.

For example, 60 per cent of Apple’s revenue comes from products that didn’t exist three years ago.[2] This indicates that, certainly within the technology sector, product growth, maturity and decline is becoming more rapid, and life cycles are shortening. This suggests that long-term product ‘cash cows’, which stay in a company’s portfolio for many years, are becoming a thing of the past.

This changing environment means that accurate demand planning and forecasting has never been more imperative, and businesses must take a co-ordinated approach to supply chain management. I believe that the key to this is the introduction of technology that enables organisations to quickly and effectively manage operations and gain a greater perspective over the entire supply chain.

Strengthening the core

I strongly believe that businesses need greater awareness of every product in their portfolio, especially those that have been a mainstay of the product mix for a long time.

This awareness is even more critical in an environment where the increasing speed in which a product moves through its lifecycle means that demand can change dramatically. Subsequently, businesses must consider implementing technology that can accurately predict future requirements.

An accurate and timely demand plan is a vital component of an effective supply chain. Without this, it would be difficult to effectively allocate supply chain resources and produce correct forecasts, resulting in supply imbalances when it comes to meeting customer demand.

The provision of a complete and accurate picture of demand can be used to evaluate where the product resides in its life, influencing strategic and tactical planning. In addition, this data can provide managers with the control needed to effectively plan and manage each phase of a product’s lifetime

For example, demand planning technology offers the capability to accurately forecast the demand of new products, short-life or seasonal products and end-of life products, as well as optimise replenishment strategies as required. Just as important, managers are able to see how demand patterns will impact an entire supply chain.

Decision support systems can also allow managers to pinpoint where unforeseen scenarios and hidden risks exist in the supply chain. This can enable businesses to alter operations dependent on changing product requirements and avoid huge losses caused by surplus inventory or backlog orders.

The implementation of an effective forecasting process allows for a greater overview of demand profiles, consumer buying patterns, and other demand signals which can then be adjusted quickly to reflect market changes and buffer against shrinking supply chains.

Inventing a new supply chain

Inventory is one of the most valuable assets a company has, but if you ask me, many companies fail to manage it effectively. And as the nature of supply chains changes due to shortening product life cycles, so must the policies used to manage and optimise inventory.

Technology support is becoming critical to selecting and executing a supply chain inventory programme. Companies should seek technology that allows them to optimise the positioning of inventory across the supply chain and that enables collaborative inventory processes with suppliers, helping to manage and forecast these relationships more effectively.

Improving inventory management practices calls for a high degree of collaboration and visibility across the supply chain, as well as more sophisticated optimisation. Companies that do not use technology to enable their supply chain inventory initiatives will not achieve the same level of performance.

I feel the sophistication of supply chain management will continue to grow, with organisations increasingly using inventory principles along the entire life cycle of a product, for example to maximise the launch of a product, a re-brand, or demand variations due to seasonality factors.

A commitment to competitiveness

Shortening product life cycles make time-to-market critical, and so businesses must utilise technology to ensure a greater perspective and tighter control of the supply chain. This approach will force organisations to favour a greater degree of cross-functional working, speed up response times to market and reduce risk through increasing visibility of demand in the chain.

As a product proceeds through its life cycle the demand characteristics change, and organisations must be committed to changing the supply chain strategy to maintain competitiveness at a moment’s notice. This can be achieved through the use of forecasting and planning technology to monitor a product as it proceeds through its life; matching a product to the most appropriate supply chain strategy for the next stage of its existence.

Using technology to offset shortening life cycles can help managers avoid huge inventory losses and issues with excess orders. The understanding and careful evaluation of the effect of these factors enable the supply chain to become more efficient and in turn drive business competitiveness in the market.

The most successful organisations will have a strong grasp of shortening product life cycles within their industry and put strategies in place to allow them to adapt quickly to changing markets, enabling new sources of revenue to be generated. Businesses that fail to react will risk falling behind competitors, ultimately facing a struggle to remain relevant in a faster-paced world.


[1] 1998: Hill and Jones: embryonic – growth – shakeout – maturity decline

[2] Asymo research 

….

Do you have any questions or suggestions, or maybe you need further information?

# Karsten Horn
add*ONE Specialist
INFORM GmbH
K.Horn@inform-software.com
Tel: +44 203 178 4722