Most products currently available to buy follow a four-stage life cycle. Each of these stages are managed and optimised by supply chain teams and their managers within a business, coordinating with stakeholders in other departments such as operations, marketing, sales, finance, and product development.
By understanding these four stages, supply chain managers are more able to reduce financial risk and product waste, and can generate valuable information and data for the business based on the growing or declining interest in their products.
The four product life cycle stages in supply chain management come after product development. Once a product has been rigorously designed, tested, and through the manufacturing process, and is ready to ship out to market, that is when the four supply chain stages begin. While many products follow this pattern, the timeline can vary in length, from months to years, from one product to another.
The stages of the product life cycle are introduction, growth, maturity, and decline. In this blog, we’ll explore each stage, and outline some products which are exceptions to the rule.
Stage one – Introduction
The introduction stage is when a new product is launched into the market. This product will likely have been created as a result of a gap in the market or due to a failure in a similar product from a competitor.
During the introduction phase, companies are trying to gain an initial market share and cement their product as an option to a viable audience. Marketing and advertising are being heavily invested in as they seek to build brand or product awareness, and suppliers need to be adaptable and ensure a responsive supply chain to accelerating customer demand and uneven schedules.
The biggest goal for supply chain managers at this introduction stage is accurately forecasting demand patterns to ensure the new product is available to those keen customers on the receiving end of the company’s promotional campaigns. Maintaining optimal stock levels across all distribution centres and outlets is essential to ensuring an engaged customer-base can access the product in a timely manner and the lead time is low between ordering a product and its arrival.
Stage two – Growth
As a new product starts to get recognition in the market and new customers buy the product, either through the continued efforts of marketing and advertising or through word of mouth from early consumers, the product enters the second stage of the life cycle – the growth stage.
During this stage, production accelerates and the quantities of a product being manufactured increases to meet rising customer’s needs and demand and to make sure the product is widely available to satisfy both new and existing customers. A company will have procurement and production goals for its suppliers and cost targets to ensure they’re still making a profit after the spend on the product launch, which supply chain managers will need to manage.
Success depends on undisrupted production and optimal product pricing at this stage. Prices need to be carefully balanced to ensure products can compete with competitors whilst still meeting revenue targets. It’s possible new competitors will enter the market at this point, so companies have the option to reduce their prices to keep or attract customers and boost sales.
Stage three – Maturity
The maturity stage is when a product becomes established in the market. It has surpassed the growth phase, and now has a loyal customer base who are repeat customers. The market share between companies and competitors settles down in this stage as people who use a product establish brand loyalty with one company.
As this maturity phase has a steady customer base, the cost of marketing and advertising goes down, freeing up revenue for the business. Production costs may also go down as suppliers and supply chain managers are more able to accurately predict how much stock is required to keep customers happy whilst keeping waste to a minimum.
This is a stage of high profit, and sales peak during this phase. It lasts the longest of all of the phases, but once the product matures, the market saturation grows as more competitors attempt to launch similar products.
When sales are peaking, a company and its supply chain managers must ensure they’re optimally stocked at all distribution points so customers aren’t lost to a lack of stock, and no working capital is tied up in excess inventory when a product is overstocked and not bought quickly enough.
Stage four – Decline
Before a product reaches the end of life stage, it hits the decline phase. This stage is when sales start falling, either due to a competitor creating a better product, interest in the product passing as the trend is over, or customer preferences change – such as a growing focus on sustainability – and the product no longer fits with their goals.
During this decline stage, a company will employ a management strategy called harvesting – this involves a reduction or termination of investments in a product, product line, or line of business so that the entities involved can reap, or harvest, the maximum profit margins before the product dies out entirely.
It is advised that businesses do not spend more money on a declining product and stop spending money on production and marketing efforts and advertising. Instead, they should focus on clearing out what they have whilst proactively looking for new innovations or gathering information on the new customer preferences to develop new products or revamp and optimise existing ones and tap into an active market.
Exceptions to the four-stage life cycle rule
There are some products whose life cycles generally don’t follow the four stage rule. These can be categorised in a couple of different ways.
Cannibalisation-driven life cycle
This life cycle happens when the product life cycle isn’t driven by competition, but instead the producer itself keeps pushing new products to market with tweaks to the product quality or superficial changes to previous iterations. This life cycle can be observed in markets such as consumer electronics.
This kind of life cycle is favourable to businesses as they already have a huge amount of information, metrics and data on their customer base and can easily source potentially successful adaptations, and how to execute a successful product launch.
Entertainment and fashion cycle
Entertainment products such as books, CDs, DVDs, and video games, and fashion items, follow a more variable life cycle to the four stages explored above.
Instead, for these products, market awareness is usually built upfront and pre-orders are encouraged – particularly for entertainment items. Sales are strong at launch and decline quickly, but there are two surges that usually happen – around a seasonal peak, such as the festive season when items are bought to be gifted, and later on when items have a price discount.
Learn essential skills in the different stages of product life cycle management
If you have an interest in supply chain strategy and are looking to develop a rewarding career in the industry, you’ll be poised for career progression into this exciting field by studying an online and part-time MBA Leadership with the University of Lincoln.
On this degree, you’ll explore advancements being made in the modern world of work by the increasing use of technology, learn essential supply chain skills and the methodology behind them in demand forecasting, and develop key leadership skills such as using initiatives to motivate a workforce. You’ll hone your decision making and problem solving abilities, and will learn by studying a range of real-world case studies.