The progression of a product from its launch into a market, its growth and popularity and eventual decline and removal from the same market is known as the product life cycle. It can be broken up into 4 basic stages:
Introduction – Following product development, the marketing team develops a promotion and sales strategy and introduced a product to the market. Sales may be low and the product may or may not have competitors to contend with.
Growth – Once product acceptance is established, sales begin to rise. The product may undergo further development to stay relevant.
Maturity – Sales may now have peaked and there may be abundant competitors offering similar or better solutions ensuring stiff competition. It may become difficult to stay on top and stay relevant.
Decline – Sales now actively begin to decline and the product may be seen as stagnant and redundant. The product may be phased out at this point.
There is no set time period for each stage. It is dependent on the nature of the product, how often it is developed to stay competitive, how loyal a following it develops, how aggressive the marketing and sales are, and how competitive the industry is. Given the uncertain nature of the cycle, it become extremely important for organizations to effectively manage this cycle.
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In this article, we look at 1) product life cycle management, 2) phases in product life cycle management, 3) product lifecycle management goals, 4) benefits of product life cycle management, 5) maintaining successful product life cycle management, and 6) examples of successful product life cycle management.
PRODUCT LIFE CYCLE MANAGEMENT
Product life cycle management or PLM is not merely technology but an essential business approach to managing a product from its conception to its decline. The clarity of the PLM process is foremost in ensuring effective management of the product. The process will encompass all aspects of the product including relevant data, the people involved, and the business and technical manufacturing processes. The PLM then becomes the anchor connecting different areas and allows for clear and effective communication among them.
Overview of PLM
The Core PLM Concept
At its core, the PLM process aims to establish and protect information defining the product. This information is then shared with stakeholders to ensure that the product remains in focus and a priority proactively to ensure it is managed in the best possible way. The three core principles therefore are:
- Provision of secure and managed access of the product information
- Maintenance of information integrity throughout the life of the product
- Management of business processes that will use, share and build on this information
PHASES IN PRODUCT LIFE CYCLE MANAGEMENT
The following process can help even the smallest organizations develop and maintain an effective PLM process:
1. Plan & Strategize
It is vital to begin by establishing company requirements and defining the criteria for success. Companies vary in what they produce and how they sell it. Once these requirements and criteria are defined, work can begin on establishing a channel for the product to flow through and information relevant to the product can be made available centrally to all those who are relevant to its lifetime in the market. Shortcomings in existing processes can also be highlighted here and those areas necessary for gaining or maintaining a competitive advantage identified.
2. Consolidate Information
No matter what PLM process or solution is employed, it is necessary to gather all data and information pertinent to the product in one central location. This will allow access to all relevant people and reduce redundancy, rework or conflicts in design or development.
3. Establish Internal Collaboration
Once all the information is centralized, access to it should be provided to different teams and collaborations made mandatory. Design, manufacturing, procurement and sales units should work together to ensure the most relevant product.
4. Automate New Information
All subsequent development work to a product, design or otherwise, should feed back into the information repository to allow continued access to relevant information. There may be several potential changes or developments underway at any point. An automated system should allow the most updated information to be accessible.
5. Link Product Design, Manufacturing and Marketing
If there are any changes to the product design being worked on, then timely communication of the same to the manufacturing unit will allow them to have the necessary raw materials on hand to begin manufacture as soon as the design is complete. Similarly, if a new product design is to be sold to the customer, the marketing unit should have sufficient time to plan for and promote this in the market to generate interest. This link is vital to the success of the product in its life cycle.
6. Establish External Communication
In the same concept as above, it is a good idea to communicate with suppliers and end users. Suppliers can be informed of changes and new part requirements and customer feedback and requirements can be incorporated into the product designs and redesigns.
A focus on these 6 points will be a step towards ensuring a longer and more successful growth stage for the product in its life cycle.
PRODUCT LIFE CYCLE MANAGEMENT GOALS
The basic goal of a PLM should be to create a simple and flexible process that is easy to use and maintain.
All kinds of costs associated with a PLM can be managed by automating the process and making full use of its features. Users of the system should have as much autonomy to manage their own tasks as possible. Information should be clear and easy to access and use.
The work and rework associated with a product during its lifecycle can be optimized by ensuring that redesigns are easy to add on to existing products without starting from scratch. All processes should have standard definitions to avoid overlap and conflicts.
BENEFITS OF PRODUCT LIFE CYCLE MANAGEMENT
By now, it is abundantly clear that to remain relevant and successfully manage a product through its life cycle, it is vital to have a clear system to manage all the data and streamline processes. The benefits of this PLM system are numerous and of great value to the business. Some of these benefits are:
Time to Market
With a central repository of data, a product can be developed much faster from design to prototype and launch. There is less rework and less redundancy of effort. This results in quicker time to market and allows the business to stay ahead of competitors and establish customer loyalty.
Because all areas that work on the product have the same information, it becomes easier to stay compliant with any laws and regulations. This reduces risks of expensive recalls, legal action and loss of sale and consumers.
As a result of better communication and collaboration, there is significantly less re-work and re-design as the product incorporates necessary consumer features and compliance requirements during initial design runs. This helps reduce costs associated with multiple design and product testing iterations.
One more benefit of common and easy to access information is increased productivity. There is significantly less time spent on replicating data, requesting for information, waiting for approvals and basic research. Relevant updated data allows everyone to focus on the task at hand and not be overrun by unproductive parallel activities.
With reduced costs, faster time to market, and relevant products that fulfill a customer need, a PLM system can directly help accelerate revenue growth. The more relevant and reliable a product is, the more loyal its customer base and in turn, more sales when this loyalty is converted to purchase behavior.
With teams being able to work together and share information, there is more time to focus on innovation without compromise on quality or time to market. New designs and features as well as new products can be introduced to meet the changing needs of the consumer base.
A combined source of information and a unified strategy ensures that there is consistency in product quality. Through the PLM processes, it is possible to build checks for product quality into all the necessary processes and ensure customer satisfaction.
Overall, a successful PLM allows operational benefits to the company in three major areas:
Internal efficiency is the easiest benefit of PLM to prove. This involves streamlining areas such as R&D, manufacturing as well as prototype development and testing.
Efficiency for Suppliers
This area offers a lot of room to reduce costs and earn better return on investment. A successful PLM process will focus on a lower cost design which will then need less complicated parts and fewer steps to production. Efficiency in this area also means more effective purchase and customer service process.
Efficiency for Customers
An important operational benefit of a PLM process is a more focused understanding of customer needs and requirements. This leads to better product design with less redundant features and less unnecessary product development or re-design steps. This in turn leads to more satisfied and loyal customer who will not only purchase repeatedly but hopefully also endorse the product.
MAINTAINING SUCCESSFUL PRODUCT LIFE CYCLE MANAGEMENT
Every company will have a unique PLM that encompasses all relevant business processes and data. There is no one successful plan that all can follow. But four best practice steps identified and articulated by Accenture come close to ensuring maximum benefit from any PLM process. These are:
Step 1: Create an enterprise wide framework to define PLM capabilities
Here, the company needs to identify what the actual PLM activities are and then re-evaluate existing PLM capabilities. All processes, their applications, relevant metrics and data that follow the product through its lifecycle need to be carefully studied and their effectiveness critically evaluated. This process can help identify any incoherent or disconnected areas and work on streamlining these. This activity can also help ensure that all metrics measure what they should.
Step 2: Link PLM framework’s capabilities to key corporate and product priorities
Based on the company’s strategic focus, a few relevant metrics should be identified to measure the performance of the product development activities. These should not be linked to the performance of one function or team but to the entire cross functional activity.
Step 3: Use the prioritized PLM framework as an investment planning tool
The results gathered from the metrics put in place can feed directly into investment planning activities. Stakeholders can assess this information and make relevant decisions regarding future products and their potential impact.
Step 4: Establish a group to own and update the PLM framework and corporate roadmap
To make the PLM and its output a permanent feature in the organization rather than alone project, it is a necessary step to form a special team to work on making the PLM process sustainable and ensure its continued relevance to the organization. This team needs to have complete support from senior management and a sponsor from amongst the executive group.
EXAMPLES OF SUCCESSFUL PRODUCT LIFE CYCLE MANAGEMENT
Several companies continue to use effective and well-designed PLM processes to maintain and enhance positions in their respective industries. Two such examples are mentioned below.
As a provider of multiple products to a variety of both professional athletes and teams, and regular consumers, Adidas concurrently develops and launches a continuous stream of these at any point in time. This massive focus on meeting customer needs, while providing both customization and volume is the reason why the company felt the need to develop a PLM structure to allow collaboration within all units involved in the product life cycle.
Pre PLM, all information was isolated which resulted in issues with sharing information quickly and easily across groups. There was also the issue of legacy technologies that hindered collaboration and resulted in a lack of shared product knowledge. Because of this isolation, there were concerns about the integrity of data as well as supplicate efforts in recording data into systems. These isolated systems meant that for anyone to be shifted across a division, there would need to be significant resource allocation for retraining activities.
Adidas acquired Reebok and its existing PLM infrastructure and framework in 2006. This allowed the company to populate one database for complete product related information as well as a solution for managing material requirements for efficient design and development of products. Also created was a collaboration platform across countries and regions which helped reduce product development cycle times. Streamlined systems meant that it was now possible to design new products quickly with less need for changes. There was also greater support for concurrent business models and product development and release timelines which then helped with increased features and customization.
Founded in 1933 in Japan, Nissan Motor Co manufactures and sells automobiles in over 20 countries around the world. In addition to this, the company also develops, manufactures, and sells marine equipment.
With ongoing challenges to reduce time to market in order to compete successfully as well as create more innovative and environmentally friendly cars Nissan needed an effective solution to handle its diverse product offering to a global customer base as well as to interact efficiently with its vast supplier network.
A successful PLM program helped reduce product development time by half and significantly improve quality of the product and reduce design related changes. The solution allowed Nissan to make use of existing design data and concepts repeatedly. It also helped developed virtual prototypes so that only one final physical one needs to be created. All manufacturing requirements are also taken into account very early in the design process, allowing work to begin on making these available.
1. What is the relationship between the product life cycle and the value chain and value added concepts? (See the Donelan & Kaplan, and Clinton & Graves summaries).
2. What are the stages of the product life cycle (PLC) in terms of the marketing or revenue producing perspective? (See the PLC summary).
3. Is the length and sequence of each of these stages predictable in terms similar to biological organisms? (See the PLC summary).
4. What are the stages of the PLC from the production perspective? (See the PLC summary).
5. What PLC stages are included in the customer or consumption perspective? (See the PLC summary).
6. What is the difference between product life cycles and industry life cycles? (See the PLC summary).
7. What is the main objective of PLC analysis from: 1) the producer’s perspective? 2) the customer’s perspective and 3) from society's (government’s) perspective? (See the PLC, Boer, Curtin & Holt, Lawrence & Cerf and Hammer & Stinson summaries).
8. What are the producer’s strategic objectives at the various (overlapping marketing and producer) stages of the PLC, i.e., 1) conception, design and development, 2) startup and production, 3) growth and production, 4) maturity and production 5) decline revitalize and abandon? (See the PLC summary and Clinton & Graves summary). (The target costing summaries are relevant to this question).
9. Susman (1989) shows expense indicators for the various stages in his Exhibit 1 except for the conception, design and development stage where he includes only R&D. What is another appropriate expense or cost related indicator for these combined stages? (See the PLC and target costing summaries).
10. Susman (1989) also indicates that profits are zero in the conception, design, and development stages. What is an appropriate measure of income or profit to consider in these stages? (See the PLC and target costing summaries).
11. What is the meaning of the term technological risk and what type of investment strategy creates the greatest amount of this type of risk? (See the PLC, Investment Management summaries. The Hayes & Wheelwright summary is also relevant).
12. What is the meaning of the term market share risk and what type of investment strategy creates the greatest amount of this type of risk? (See the Investment Management summary. The Hayes & Wheelwright summary is also relevant).
13. Which stages of the PLC does traditional cost accounting consider? Which costs are considered? (See the PLC summary).
14. Which stages of the PLC does life cycle costing consider? Which costs are considered? (See the PLC, Hertenstein & Platt, Clinton & Graves and Howell & Soucy summaries).
15. What is an experience curve or learning curve? (See the Learning Curve summary).
16. What is forward pricing? Hint: The answer is related to the learning curve (Susman 89). (See the PLC and Learning Curve summaries).
17. Why would forward pricing be used in the startup stage of the PLC? (See the PLC summary).
18. How does the PLC concept focus on the long run as opposed to the short run? (See CAM-I Figure 2-3 & Figure 2-4 and the PLC, Hertenstein & Platt and Clinton & Graves summaries).
19. What are some of the things that are emphasized at the design and development stages of the PLC? (See the PLC and Cokins 2002 summaries).
20. Why are companies reluctant to use the PLC concept? (See the PLC summary).
21. What are the two main life cycle strategies? (See the PLC summary). (See Clinton & Graves for a 3rd strategy, and Hayes & Wheelwright for 4 growth models).
22. What are economies of scale? What is the difference between the static concept and the dynamic concept? (See note on Economies of Scale).
23. What are economies of scope?
24. How do the concepts of economies of scale and scope relate to the two types of strategy referred to in question 21? (See the PLC summary and Hayes & Wheelwright summaries).
25. What percentage of the product’s life cycle costs are determined before production starts? (See the CAM-I summary).
26. What is the tradeoff between design and development costs and production and logistical support costs? (See the CAM-I Figures 2-4 and 7-2 and the Cokins 2002 summary).
27. How are the various types of costs (engineering, manufacturing and logistical support) distributed across the PLC? (See CAM-I Figure 5-2).
28. What is the portfolio theory or concept? (See the PLC summary and Adamany & Gonsalves summary).
29. How is the portfolio concept related to the PLC concept? (See the PLC summary and Adamany & Gonsalves summary).
30. What are the final customer’s product life cycle costs? (See the Artto and PLC summaries).
31. When and how should the customer’s PLC costs be considered by the customer? (See the PLC summary for the example provided by White and Ostwald).
32. Shields and Young (1991) make a distinction between life cycle costs and whole life costs. What is the difference between these concepts? (See Shields & Young summary). (See the Estes summary for a discussion of social or stakeholder accounting).
33. When should the final customer’s PLC costs be considered by the producer? (See the Estes summary for some ideas).
34. Discuss the problems created by the traditional cost focus? (See the PLC summary and Hertenstein & Platt summary).
35. Discuss the relationship and compatibility of the PLC concept with the other concepts such as Deming’s theory of management, ABC, ABM, JIT, and TOC.
36. Discuss the underlying assumption in standard costing related to cost drivers and the reason cost allocations based on this assumption tend to create distortions in customer and channel profitability. (See the Manning summary).
37. Discuss the underlying assumption in activity based costing related to cost drivers, as described by Manning, and the reason cost assignments based on this assumption tend to create distortions in customer and channel profitability. (See the Manning summary).
38. Discuss the underlying assumption in Manning's SCM approach related to cost drivers and the reason cost assignments based on this assumption tend to create more accurate estimates of customer and channel profitability. (See the Manning summary).
39. Is the invalid assumption referred to in question 37 part of the ABC concept? Discuss this issue.
40. How is target costing related to product life cycle management? (See Target Costing). (See the Yu-Lee summary for a critics view of target costing).