I bought a new smartphone last week. I am not such a “tech geek” that I always want to have the latest version, but still, I buy a new phone about every 3 years. So I was a bit surprised that, of the brand I bought, already five new models had been released since my last purchase, and then I didn’t even count the special editions. It is clear that the product life cycle of products is getting shorter.
To keep up with “the market”, companies are launching new products, or new models of the same product, faster and faster. From a marketing and sales perspective, such a strategy surely will be recommended to attract new customers or to convince existing customers to switch to a new version or model. There is no doubt however, that it will also become more complex to manage your supply chain. Each product has less history and before you know, a product that you produced only yesterday, has already been replaced by a successor. Sometimes you might even only have one chance to produce or purchase, for example with special editions.
Are there only new products coming in?
It is important that your business remains profitable. Of course, it is nice to be able to grow sales through the introduction of new products, but do you also make sure that old products, which are no longer profitable, disappear from the range? After all, those old products often tend to continue to exist … because “customer X absolutely needs the old model”, or “the turnover is still quite high, we should not lose it”. Arguments we can only encounter if we can clearly demonstrate profitability of those products. The REAL profitability, not the one based on a cost price calculation from the time when you were still mass-producing the product, but based on the actual costs you incur for today’s limited quantities.
In my opinion, a good way to keep control is to immediately indicate which product will actually be replaced when planning a new introduction, in order to already take into account a phasing out of the old product. In many planning software, you have the option to designate a successor per product, which also gives you a basis for the forecast of the new article.
Dare to remove products from your portfolio!
A new product introduction is often not directly related to another product that will be deleted, so there is just a product simply added to the assortment. Unfortunately, this doesn’t always mean that a lot of turnover will actually be added… After all, almost always, a part of your current range will be cannibalized. Keeping track is therefore important: which products lose sales after the introduction of one or more new products?
Dare to question whether it is still necessary to keep those articles in your portfolio, decide in time to stop them and communicate this in the organization. How often don’t you hear, that when the marketing department communicates a discontinuation of a product, a purchasing order for product-specific raw materials has just been placed? By involving different departments earlier in the process, you can anticipate these situations. You will avoid excess stock at the end of your product’s life, and the costs of massive discounts or even destruction of your stock, that come along.
The lifecycle of products has become increasingly shorter over the last decades and this does not make management of your supply chain any easier. When new products are introduced, keep a close eye on which products are being replaced or cannibalized. Also dare to remove these from your portfolio when it is no longer profitable to keep them and communicate in time to avoid excess stock.
Are you also being faced over and over again with excess inventories of products that are no longer in your assortment? Is it difficult to actually make the decision to delete products from your portfolio? And is communication on this decision often poorly organised? If you have questions on keeping control over your product portfolio in all phases of the supply chain, do not hesitate to reach out to me and we can discuss how I can help.