From smartphones and laptop computers to common household items and fast-moving consumer goods, all products have a life cycle that begins when the product enters the marketplace. This is what supply chain management professionals refer to as the product life cycle - the life expectancy of a product spanning its introduction to customers until it becomes obsolete.
The life cycle's length for a particular product or industry can vary based on industry factors and consumer behavior. Certain industries, such as consumer electronics and fashion, typically have shorter life cycles (sometimes lasting just months) due to being highly influenced by trends and changing consumer preferences. Conversely, other products, such as strong grocery store brands and staple goods, can remain in the life cycle for several years.
Whatever the case, organizations need a system or framework for managing and extending the life cycle of both existing and new products to maximize profits and minimize losses. This is where product lifecycle management comes in.
Product lifecycle management (PLM) is the process of managing goods as they go through the different stages of their product life cycle-
Product lifecycle management allows companies to make informed business decisions about things like pricing, product expansion, and cost-cutting to drive profits and efficiency. Product lifecycle management systems also help companies keep up with the growing complexity and manufacturing challenges of developing and building new products.
By understanding and then optimizing the product life cycle, businesses can bring together departments, teams, and even other companies (e.g., suppliers, contractors, and logistics partners) involved in the production process and streamline their activities. By doing so, companies can produce a product that outperforms the competition, generates profit, and stays on the market for as long as customer preferences and technology permit.
Many people think that product lifecycle management only covers product design, development, and manufacturing, but it also extends to sales and marketing.
For example, a product that is in the early stage of its life cycle will need introductory marketing and strategies geared towards raising awareness. On the other hand, a mature product will require sales and marketing strategies that seek to differentiate the product from new market players and challenger products.
The concept of the product life cycle is hinged on the assumption that all products go through the cycle of development and introduction, product growth, maturity, and decline. The idea is that the more time a product spends in the market and goes through its life cycle, the more sales it will generate.
Of course, the actual duration and scope of the product life cycle will vary from one product to the next. However, most companies can expect their products to follow these stages.
- Product Development and Introduction
- Product Growth
- Product Maturity
- Product Decline
The product lifecycle management process can be broken down into a series of five steps, each one addressing different aspects of the product life cycle.
Product life cycle management allows companies to synchronize different processes involved in the product's value chain, from design and manufacturing to marketing and after-sales support. For instance, when a product is still in the research and development stage, product life cycle management systems allow for changes to happen alongside product tests.
Making real-time design adjustments to a product as tests happen makes the product development process more agile and makes time-to-market faster for new products.
This may not seem like a huge deal, but many companies can spend as much as 25% of their revenue on developing new products. For large companies, chipping away just 1% off that figure can translate to hundreds of hours saved and a substantial increase in profit margins simply by making design processes more efficient.
Businesses that adopt product life cycle management systems, in particular, software with automation features, can unlock more innovation opportunities and respond to customer feedback in real-time.
Product life cycle management makes the bill of materials (BOM) management more efficient, connecting them with the relevant pricing data, manufacturing data, documentation, source information, and product definitions.
A bill of materials is a comprehensive list of raw materials, sub-assemblies, components, sub-components, and the quantities of each required to manufacture a product. It also includes the instructions and supporting systems required during the manufacturing process.
BOM management covers a wide range of business functions and processes, from engineering design, procurement, supply chain management, and sales and marketing (for introducing products to market). Integrating product life cycle management systems with BOM management processes can streamline these activities and enable collaboration with external partners such as contractors and suppliers.
Product life cycle management can also optimize engineer-to-order (ETO) processes, wherein a product is designed and built after a customer places an order. The ETO process depends on customer requirements (usually expressed as functions and specifications) driving a new design, built from scratch, that meets those specifications.
Product life cycle management for ETO offers a streamlined and accessible solution for relaying customer requirements to sales, design, and engineer teams. Consolidating these requirements also allows companies to share information with external partners, such as investors, suppliers, and of course, customers.
As the competition tightens and customers have higher expectations about the products and services they buy, companies that can manage their engineering teams, procurement processes, and ETO requests efficiently are in a better position to drive customer satisfaction.
Reducing product development costs, making production more efficient, and bringing products to market faster are the primary objectives of product life cycle management. Hitting these targets requires managing three production functions-
- Change Management - This is how an organization handles changes during the development, manufacturing, product usage stage. A product life cycle management system can organize all revisions and cancellations and track all document versions throughout the value chain.
- Cost Management - Cost management tracks the costs associated with the tools and components used during product development. Product life cycle management systems can track these costs and improve cost transparency, allowing manufacturers to identify cost issues before launching a product.
- Supplier Qualification - Supplier qualification is a risk assessment function that determines the organization's level of confidence that suppliers and contractors can provide consistent quality and quantity of raw materials, components, and services.
Product life cycle management provides the tools and resources to optimize the distribution and servicing of products. For instance, software with an integrated product information management (PIM) solution can ensure that sales and marketing departments receive accurate information about products after they are manufactured.
This effectively creates a single repository for all product data - including stock-keeping units, images, product features, and pricing - that both engineering and non-engineering teams can refer to at any time.
As a product moves through the introduction, growth, and maturity stages of its life cycle, it needs to be paired with excellent customer service to attract and retain customers. Product life cycle management addresses these concerns by staying on top of any quality issues, customer feedback, and engineering updates in a closed-loop environment.
By now, it should be clear why every company needs to invest in product life cycle management. It offers a plethora of benefits, ranging from enhanced operational efficiency to greater levels of customer satisfaction. Other benefits include-
- Faster Time-to-Market
- Seamless Compliance
- Cost Control
- Enhanced Productivity
- Increased Revenues
- Supplier Efficiency
The product life cycle is an essential concept in marketing, supply chain management, and project management. By optimizing the process of introducing products into the market and taking them out when they are no longer profitable, businesses can ensure that their products satisfy a real market need and stay as long on the market as customers allow.
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