© 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 IntroductionGrowthMaturityDecline Sales, cost, and cash flow 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 ConceptDetailedManufacturingDistribution, designdesignservice, prototypeand disposal Percent of total cost 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 Cycle Growth 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 Cycle Maturity 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 Cycle Decline 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