To stock or not to stock

Product lifecycle management: From deciding whether or not to stock a new product to determining how best to phase out an item at the end of the product life cycle, decisions around assortment management are often coupled with a high level of financial risk.

As a result, such decisions should not be taken lightly. Unless you have a complete understanding of how your decisions will impact other departments within the business, how can you be sure that you are adopting the right approach to product lifecycle management?

In this article, we explore how you can encompass both sales and the wider supply chain team into the product lifecycle decision making process.

What is product lifecycle management?

From the point of initiating a new product launch right through to phasing an old product out, every product goes through several key phases. This is commonly known as the ‘Product Lifecycle’. At each step of the cycle, supply chain teams have to make critical decisions about the product’s future.

Product lifecycle management is about integrating data, people and processes to strike the optimal balance between product availability and risk at every stage. Through effective Product lifecycle management, supply chain teams gain better visibility and control. This ultimately helps to drive down cost and time to market.

What are the benefits of effective product lifecycle management?

By managing products lifecycles effectively, businesses can ensure products move smoothly through the introduction, growth, maturity and end of life phase.

However, product lifecycle management should also ensure continuity. Through the seamless phasing in and out of products, effective product lifecycle management should help businesses to avoid cannibalisation and obsolete stock.

Why is product lifecycle management so important to s&op?

A key element of the S&OP process is to review products and make collaborative decisions around whether products should remain in the range. However, it’s a little bit more complicated than that- the goal is also to determine the best way to action these decisions depending on where each product is in the product lifecycle.

For example, in the early stages of the product lifecycle, the question is around how much inventory to order in the first instance as well as whether the product in question deserves a permanent position within the portfolio.

On the other hand, mature items should be monitored closely to ensure inventory levels align with future customer demand. If sales are starting to slow, action must be taken to prevent the build–up of stock which could soon become obsolete.

At the end of the product lifecycle, the focus shifts to how best to discontinue the item. Given the item may be replaced by something else, the S&OP process should support effective range planning.

How can S&OP help you make better PLC decisions?

When it comes to launching a new product, there is always lots of excitement. Everyone has to do their bit to make the launch a success. However, here is where the problems begin!

Every team has a different opinion on how the product should be managed through each phase of the product lifecycle. And when it comes to the decline phase, the cracks often start to show. After all, no one wants to be responsible for a failing product!

The question is: how you can work with other business divisions to agree on the best approach to introduce new products, review existing lines, and manage end of life items?

Thankfully, this is where S&OP comes into play!

In essence, sales & operations planning helps achieve consensus on the following:

Understand the benefit/potential cost of introducing a new item
Agree upon the initial order quantity for a new item
Establish appropriate measures to monitor the performance of new items
Review recently added items and agreeon the best course of action: continue or cut
Prevent obsolesce through analysing product life cycles and determining the best approach for managing the end of lifeitems

What are the 4 stages of product lifecycle management?

Introduction

At this point, the product has just been introduced to the range
The first purchase order based on the internal forecast, typically based on a similar product in the range, or to fulfil a customer order

Growth

This is typically the first couple of months after the product has been introduced

Sales must be closely monitored
By tracking how actual sales compare to the forecasts, decisions on the continuation of the product can be made
The forecast must be continually updated in response to the evolving levels of demand

Maturity

At this point, sales growth has plateaued
The product is established in its market and now regular replenishment orders are in place
Buffer stock must be optimised to avoid stock–outs
However, demand should still be monitored to spot any signs of decline as the product moves towards the end–of–life phase

End of life

The trend of the product is now in a steady decline.
We must stop placing new orders and sell through the residual stock
The goal here is to minimise the amount of obsolete stock

Product lifecycle management: Download your guide today!

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Product lifecycle management | S&OP