Product Life Cycle
When your business works with products, there is a product life cycle that needs to be observed in order to maximise the efficiency of the supply chain operation. Many brands have lost money and integrity because of having too much inventory at a time when the product is nearing the end of its life cycle.
Product life cycle is not to be confused with product shelf life, which is the length of time an individual, consumable product unit can be stored between manufacture and use.
Introduction : The costs are high at this stage from research and development. Awareness of the product and sales would be low.
Growth : Audiences warm to the product and sales pick up. Income is spent on recovering investment and obtaining more stock
Maturity : The product is established in the marketplace and is generating profit. Market share must be closely managed.
Decline : Trends and market factors can lead to declining sales. Excess inventory could be jeopardising profits.
Managing the Product Life Cycle
Some products remain unchanged for decades, but just need a concerted marketing effort in order to maintain their market position. For example, Coca-Cola’s core product hasn’t changed in over a century. It has been in the maturity stage of the product life cycle for most of the 20th Century. The company spreads risk by creating new product variety such as Coke Zero and limited edition packaging.
High value items and technology products have a market duration which is a lot more sensitive. For every breakthrough gadget there are numerous tech-based products that do not reach the market quickly enough. If a new style of headphones takes a year to develop, a competitor may have brought a more advanced product to the market by the time the first product is ready. In this case, the maturity stage is at risk of not even happening.
So how do you manage the life cycle of your product? Stock control and inventory planning can be key to maximising profits. If an item has been in storage for a long period of time, waiting to be sold, its profitability is reducing every single week. After a few production cycles of a product, attention should turn to more efficient methods of manufacture. At some stage, the product is bound to become less saleable, but only products and brands with well-managed life cycles can produce maximum profit.