Product Lifecycle Management
The Product Life Cycle
The product life cycle consists of the different stages that a product passes through during its lifetime. The standard product life cycle tends to consist of introduction, growth, maturity, decline, and future development. Outsourcing and foreign production are phases included in internationally available products.
Both product life cycle management (PLM) and a similar strategy, continuous improvement plan (CIP), streamline the process by which new products are developed, improved, and refined for continuous process improvement and cost savings. PLM can be deployed in phases, addressing the most essential processes first (Savitz & Heppelmann, 2012).
Product development entails the design and manufacturing of a product. Businesses must update a product through its life cycle from conceptualization to exit strategy in order to conform to trends in the marketplace. When a product grows rapidly in a home market, there is a saturation point that occurs when low-wage countries imitate and flood the international markets with the product. A product decline occurs as new and/or better products are introduced (Adams, 2012; Markgraf, 2012).
Introduction and Growth
The introduction stage is the initial stage in which a business forages for ideas for a new product. Sources for new product ideas include customers, competitors, newspapers, journals, employees, and suppliers. Managers should also develop business strategies to encourage participation to bring new ideas forward and collaboration for increased improvement. Ideas generated during this period guide the process of product development.
During the growth stage, competition is low and sales volume grows rapidly. The reduced level of competition allows companies to focus on developing new products and not worry as much about competition. Increased sales also provide income for further developments. This stage is characterized by high product prices, profits, and product promotions. International followers have not yet had time to develop imitations, so the product supplier can export the product. More people want to buy the product until demand and sales level off (Adams, 2012).
In international markets, the product life cycle accelerates due to the presence of follower economies that quickly imitate the success of others. Companies should learn to adapt and show unique value propositions and a high quality of work. To stay competitive in all markets, including international ones, businesses seek opinions from workers, customers, and other businesses to avoid the pursuit of costly and unfeasible ideas. This is accomplished through interviews, crowdsourcing, and other tools. Technology advances have helped to facilitate the process. External industry factors may include competition, legislation, and changes in technology (Markgraf, 2012; Adams, 2012).
Maturity and Decline
In the maturity phase of the product life cycle, demand levels off, sales volume slows, and imitations appear in foreign markets. There are complications that companies must deal with outside of product development. The original supplier may reduce prices in order to maintain market share and support sales. In this stage, profit margins may decrease. The business remains attractive while volume is high and development and promotion costs are down. Markets can be evaluated through strengths, weaknesses/limitations, opportunities, and threats (SWOT) analysis (Markgraf, 2012; Adams, 2012).
During the product decline phase, sales volume decreases as products are phased out and discontinued. The original supplier can no longer produce the product competitively but can generate return by reducing inventory and selling the remaining products at discontinued prices (Markgraf, 2012).
Extension strategies include techniques used to delay the decline stage of the product life cycle. The maturity stage is a good stage for generating a profit. The longer the company can extend this stage, the more profitable the company will be.
Extending the life cycle of products leads to new approaches in packaging and involves product, pricing, and rebranding strategies. Re-packaging, re-pricing, and re-branding can result in a new market, which leads to an increase in sales. Expanding abroad as part of a globalization effort is another strategy often used. This may be costly, because the product has to be introduced in a completely new market that has not yet been exposed to the product.
Companies struggle to find a balance between what they must own versus what they can source. Sourcing can happen through collaborations, partnerships, alliances, joint ventures, venturing, or acquisition. Factors that influence the decision include the ability to protect the innovation, timing, risk, and cost.
With external sourcing, it is much harder to control what happens during the production process. Sourcing involves obtaining research and development (R&D) externally instead of internally. When a company pursues external R&D, it should do as much research as possible on the company it hires to ensure that its quality of production, treatment of employees, and working conditions do not raise ethical concerns and will not cause a public relations crisis later (Flatworld Solutions, 2012).
A survey in R&D Magazine (2007) outlined benefits to outsourcing R&D, including a faster time to market for the product or service, lower expenses, compensation for a shortage of manpower, and the expertise of the outsourcing firm (Witzeman et al., 2006; Inc., 2009). Companies that provide research for other companies include Innocentive (http://www.innocentive.com/ ), NineSigma (http://www.ninesigma.com/ ), Yet2.com (http://yet2.com/ ), YourEncore (http://www.yourencore.com/ ) and The Alliance Framework (http://idea.usaid.gov/gp/alliance-assessment-framework ) (Witzeman et al., 2006; USAID's Office of Innovation and Development Alliances, 2012).
Continuous Process Improvement
Businesses should develop continuous process improvement (CPI) practices for continuous improvements and an optimized utilization of resources. Continuous process improvement (CPI) includes a set of activities designed to identify, analyze, and improve existing processes through constant review. Rummler and Brache's (1995) research showed that processes account for 80 percent of all problems, while people account for only 20 percent. The goals of process improvement include improving customer satisfaction, reducing variation, and removing activities that have no value to the company (Clark, 2010; The National Institute of Standards and Technology, 2012).
There are many models that look at CPI and how businesses should best implement business practices. One model of CPI is the analysis, design, development, implement, evaluate (ADDIE) model. The analysis phase is used to identify areas of opportunity and target specific problems based on team brain-storming sessions, process definition, recommendations, and other analysis techniques.
In the design phase, plans or solutions are designed through brain-storming sessions, identification of required resources, and bench-marks. A detailed procedure for implementing a product is formulated in the development phase. The solution is then executed in the implementation phase. The evaluation phase is used to build measurement tools, monitor implementation, and evaluate measurements. This phase is performed throughout the entire process (Clark, 2010).
Diagrams and Customization
Diagrams and mock-ups are utilized as models in product life cycle management. This practice allows for the creation of visual prototypes and user validation before any method is developed. This approach breaks large projects down with goals included and priority given to high-risk items. Use cases are a foundation for documentation, training materials, and test plans (Aras, 2011).
The way business is conducted is changing quickly. As products become more complex and customizable, many companies have started to create product “wizards,” programs that walk customers through their product decisions. Companies must coordinate intricate global supply chains with massive production facilities.
Quality function deployment is a tool that combines the voice of the customer, product engineering requirements, and competitive benchmarking information in product development (Cristiano et al., 2000). Quality control is the process by which a product is checked and tested to ensure consistent standards of high quality. User experience management provides a view of efficiencies and responsiveness of application services, while looking at behavior, usage patterns, success rates, business impacts, and business outcomes (Ohnemus, 2012; Drogseth, 2012; Heppelmann et al., 2012).
As business data gets more complex, information overload becomes a bigger concern. By displaying complex data in a graphical manner, employees in R&D, manufacturing, and service can navigate, share information globally, and make decisions faster and more efficiently. Visual communication reduces errors, prevents misunderstandings, and decreases staff training time (Ohnemus, 2012).
Computer-aided design (CAD) files, models, and simulations are data-intensive and contain a variety of data types encompassing graphical and alphanumeric data. Models should be shared across product teams, projects, or product families. New technologies provide the economical storage and processing power to make it possible to analyze and compare the utilization and reliability of different models for different scenarios (Shilovitsky, 2012).
Understanding the product life cycle and how it impacts operations strategy is critical to a company's success. Some products develop slowly while others develop quickly. It is important to recognize that the production process that was successful when the product was in its infancy may not be successful in its maturity phase (Chambers, 2012).
Cost Control Challenge
A list of the components needed to manufacture a product is known as the bill of materials (BoM). BoM management can impact between 80 percent and 90 percent of a product's cost during the design and sourcing stage before it is manufactured, assembled, or shipped. Manufacturers use enterprise resource planning (ERP), which focuses on the manufacturing, inventory, and service of the physical product. Other information developed during the life cycle is taken from the BoM (Heppelmann et al., 2012).
Business service management (BSM) is a strategy and an approach that enables information technology (IT) components to be linked to the goals of the business. This way both the impact of technology on the business and how business changes may impact technology can be predicted (Drogseth, 2012).
Manufacturers also have to develop end of life (EoL) strategies. With original equipment, manufacturers recycle or subcontract reverse logistic and EoL treatments. Designers need to make optimal decisions through the “3R” strategies of reuse, remanufacture, and recycle (Gehin et al, 2008).
Total Quality Management (TQM)
Total quality management (TQM) is a management approach that uses a process-oriented system. Developed by Japanese firms in the 1950s, it has become increasingly more popular since the early 1980s. Total quality management describes the culture, attitude, and organization of a company whose primary goal is to satisfy its customers (Hindle, 2012; Page 27 | Top of ArticlePadhi, 2012). EFQM (formerly known as the European Foundation for Quality Management) defines quality management as more intensive relationships with customers and suppliers; continuous improvement culture; managerial, operational, and administrative processes; involvement of personnel; market-oriented organizational practices; quality improvement in cost advantages; and better profit potential (Chambers, 2012; Hindle, 2012).
Supervisors are responsible for implementing TQM in departments and teaching employees the philosophies of TQM. This training helps employees increase productivity and requires interpersonal skills, ability to function in teams, problem solving, decision making, job management performance analysis and improvement, business economics, and technical skills (Padhi, 2012).
Teams of people working together toward a goal provide more permanent improvements in processes and operations than people working alone. Team members should feel more comfortable bringing up problems and can get solutions from other workers (Padhi, 2012), and managers should consider different strategies to encourage teamwork and increase production.
Quality improvement teams or excellence teams (QITs) are temporary (three to twelve months) teams brought together to deal with specific problems. Problem-solving teams (PSTs) are temporary (from one week to three months) teams created to solve certain problems and to identify and overcome the causes of problems. Natural work teams (NWTs) are permanent teams consisting of small groups of skilled workers who share tasks and responsibilities, use employee involvement teams, self-manage, and focus on quality and work for one to two hours a week (Padhi, 2012).
A supervisor must be committed to leading employees and making sure strategies, philosophies, values, and goals are transmitted to employees, maintaining focus, clarity, and direction. TQM should be introduced and led by top management.
Commitment and personal involvement is required from top management in creating and deploying quality values and goals consistent with the objectives of the company and in creating and deploying systems, methods, and performance measures for achieving Page 28 | Top of Articlegoals. Leadership works best when employees are led by example and trained to produce a quality product. An environment must be created in which knowledge is shared and credit is given where credit is due (Padhi, 2012).
Communication is the transmission of ideas between sender and receiver. Supervisors must be open so that employees are able to send and receive information about the TQM process. Downward communication from upper management to lower-level employees is a dominant form of communication in companies (presentations and discussions). Sideways (peer-to-peer) communication breaks down barriers between departments (Padhi, 2012).
Upward communication describes a process in which lower-level employees are able to make suggestions to upper management. In order for employees to feel comfortable providing feedback and constructive criticism, supervisors must listen effectively and attempt to correct the situation. This forms a level of trust between supervisors and employees, thus facilitating communication (Padhi, 2012).
Employees strive to receive recognition for themselves and their teams. Supervisors need to detect and recognize contributors, which can lead to changes in self-esteem, productivity, quality, and effort exerted. This recognition comes in a number of different ways, places, and times (Padhi, 2012).
Methods of recognition may include a personal letter from top management, award banquets, plaques, or trophies. Places may include in front of departments, on performance boards, and in front of top management. Time may be at any time, (for example, a staff meeting, or an annual award banquet) (Padhi, 2012).
Supply Chain Management (SCM)
Supply chain management (SCM) improves ways in which companies implement resources for production or service creation and delivery. Managers should consider the best strategies to schedule activities Page 29 | Top of Articlenecessary for production, testing, packaging, and preparation for delivery. During the planning stage, companies need a strategy for managing resources to meet customer demand for a product or service. During the sourcing stage, companies must choose suppliers to deliver the goods and services to create a product. SCM managers can implement processes for managing goods and services inventory, receiving and verifying shipments, transferring them to manufacturing facilities, and/or authorizing supplier payments (Wailgum, 2008).
The making stage is the manufacturing step. Supply chain managers schedule activities necessary for production, testing, packaging and preparation for delivery. Companies can measure quality levels, production and worker productivity. The delivery stage refers to logistics. Companies coordinate the receipt of customer orders, develop a network of warehouses, choose carriers to deliver the products and set up an invoicing system to receive payments (Wailgum, 2008). The return stage occurs when supply chain planners must create a responsive and flexible network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.
Companies need to track demand, supply, manufacturing status, logistics, and distribution. Supply chains work to design, produce, and deliver products with customer expectations. The product life cycle consists of different stages that a product passes through during its lifetime. Companies need to be aware of development at each stage to improve the processes. Companies should consider the best strategies when implementing introduction and growth. Market research needs to be considered about the best ways to approach new projects.
SOURCES OF ADDITIONAL INFORMATION
The Association of International Product Marketing and Management (AIPMM), http://www.aipmm.com/
American Society for Quality (ASQ), http://asq.org/index.aspx
Configuration Management Process Improvement Center (CMPIC), http://www.cmpic.com/
Adams, D. (2012). Five phases of the new product development process. Chron.com . Retrieved October 15, 2012, from http://smallbusiness.chron.com/five-phases-new-product-development-process-16006.html
Aras (2011). Product life cycle management: An informational guide to understanding PLM. Retrieved October 15, 2012, from http://www.product-lifecycle-management.info/plm-implementation/plm-best-practices.html
Chambers, R. (2012). Big data analytics and the product life cycle. Boilers76. Retrieved October 15, 2012, from http://boilers76.wordpress.com/2012/07/10/big-data-analytics-and-the-product-life-cycle/
Clark, D. R. (2010). Continuous process improvement. Retrieved November 15, 2012, from http://www.nwlink.com/~donclark/perform/process.html
Drogseth, D. (2012). Product lifecycle management for IT. APM Digest. Retrieved October 15, 2012, from http://apmdigest.com/product-lifecycle-management-for-it
Flatworld Solutions. (2012). Ethical questions regarding outsourcing. Retrieved November 28, 2012, from http://www.flatworldsolutions.com/articles/ethical-questions-regarding-outsourcing.php
Gehin, A., Zwolinski, P., & Brissaud, D. (2008). A tool to implement sustainable end-of-life strategies in the product development phase. Journal of Cleaner Production, 16(5), 566–576.
Heppelmann, J., Savitz, E. (2011). Product lifecycle management: A new path to shareholder value? CIO Network. Retrieved October 15, 2012, from http://www.forbes.com/sites/ciocentral/2011/08/05/product-lifecycle-management-a-new-path-to-shareholder-value/
Hindle, T. (2012). Total quality management. The Economist. Retrieved October 15, 2012, from http://www.economist.com/node/14301657
Inc. (2009). How to outsource R&D. Retrieved October 15, 2012, from http://www.inc.com/welcome.html?destination=http://www.inc.com/guides/growth/outsource-research-development.html
Markgraf, B. (2012). The three stages of the international product life cycle theory. Chron.com . Retrieved October 15, 2012, from http://smallbusiness.chron.com/three-stages-international-product-life-cycle-theory-19364.html
The National Institute of Standards and Technology (NIST) (2012). Continuous improvement. http://www.nist.gov/mep/manufacturers/process-improvements.cfm
Ohnemus, T. (2012). Visualization: A picture tells a thousand words. Forbes. Retrieved October 15, 2012, from http://www.forbes.com/sites/sap/2012/08/01/visualization-a-picture-tells-a-thousand-words/
Padhi, N. (2012). Eight elements of TQM. iSixSigma. Retrieved October 15, 2012, from http://www.isixsigma.com/methodology/total-quality-management-tqm/eight-elements-tqm/
Shilovitsky, O. (2012). Inforbix, big data and product lifecycle. Inforbix. Retrieved October 15, 2012, from http://www.inforbix.com/inforbix-big-data-and-product-lifecycle/
USAID's Office of Innovation and Development Alliances (IDEA) (2012). Alliance assessment framework. Retrieved October 15, 2012, from http://idea.usaid.gov/gp/alliance-assessment-framework
Vonderembsea, M., Uppalb, M., Huangc, S., & Dismukesd, J. (2006). Supply chains: Towards theory development. International Journal of Production Economics, 100, 223–238. Retrieved October 15, 2012, from http://www.sciencedirect.com/science/article/pii/S0925527305000241
Wailgum, T. (2008). Supply chain management definition and solutions. CIO. Retrieved October 15, 2012, from http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions
Witzeman, J., Slowinski, G., Dirkx, R., Gollob, L., Tao, J., Ward, S., & Miraglia, S. (2006). Sourcing external technology for innovation. Strategic Alliance. Retrieved October 15, 2012, from http://www.strategicalliance.com/articles/SourcingExternal.htm
Yoskovitz, B. (2012). 6 tips for implementing continuous process improvement. Instigator Blog. Retrieved October 15, 2012, from http://www.instigatorblog.com/6-tips-for-implementing-continuous-process-improvement/2012/02/13/