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Product Life Cycles May be any length from a few hours (?) to decades The operations function must work in several

modes at once R&D (pre-launch PLC) Redesign/refine (early PLC) Capacity mgt ( mid - late PLC) Clean exit (decline PLC)

Product portfolio management aims to keep steady revenue streams

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Product Life Cycles

Negative cash flow

Introduction Growth Maturity Decline

Sal

es,

cost

, an

d c

ash

flo

w Cost of development and production

Cash flow

Net revenue (profit)

Sales revenue

Loss

Figure 5.1

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Product Life Cycle Costs

Costs incurred

Costs committed

Ease of change

Concept Detailed Manufacturing Distribution,design design service,

prototype and disposal

Per

cen

t o

f to

tal c

ost

100 –

80 –

60 –

40 –

20 –

0 –

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Product Life Cycle

Introductory Phase

Fine tuning of design in response to market feedback may cause extra expenses for

1. Research

2. Product development

3. Process modification and enhancement

4. Supplier development

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Product Life CycleGrowth Phase

Product design begins to stabilize Successful design emerges

Effective forecasting of capacity becomes necessary Need for collecting info from market

Adding or enhancing capacity may be necessary Wait and see / explore options

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Product Life CycleMaturity Phase

Competitor products in market Seek innovation to differentiate

High volume, innovative production may be needed Look for cost advantage / contribution pricing / version mgt

Simplify options Product is now a cash cow / what’s next?

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Product Life CycleDecline Phase

Unless product makes a special contribution to the organization, must plan to terminate offering

Exit strategy set by marketing responding to cashflow and brand protection pressure.

Operations follow their lead. Reduce inventory, plan new production, etc