© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycles May be any length...
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Transcript of © 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycles May be any length...
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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 –
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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?
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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