Why Product End of Life Doesn’t Have to Be a Tragedy

Education / Why Product End of Life Doesn’t Have to Be a Tragedy
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Summary: Product end of life is difficult for manufacturers because they lack a comprehensive record of product data. Organized product data solves this problem by enabling teams with the information necessary to maximize profits during product end of life. 

Here at Upchain, we take a pretty fatalistic view towards product development.

That is, all products die.

It might not be today, it might not be tomorrow… but eventually, every product is discontinued.

And this inevitable decline presents a problem for manufacturers who make products like irrigation systems or complex infrastructure products that last 10 or 15 years. How do you slowly unwind a product? How do you manage repairs and maintenance? How do you reduce your costs as products become less profitable over time, and how do you retrofit or maintain backward compatibility as innovation (especially software innovation) makes products obsolete faster and faster?

Today, we’re going to tackle these questions and maybe uncover a better way to retire products (spoiler: it’s product data).

What is the product lifecycle?

Let’s just clarify what we’re talking about first.

The product lifecycle is essentially the journey of products from cradle to grave. Within that, 5 stages:

  1. Development: the initial ideation and design of the product.
  2. Introduction: the product first hits the market and sales begin to accrue.
  3. Growth: the product begins to gain traction in the market with sales steadily increasing.
  4. Maturity: sales hit their peak and start to cool off.
  5. Decline: sales decrease and the product is eventually retired.

We’re looking at the last stage: decline.

Product end of life

Traditional product end of life strategy is run in three main stages:

  1. Add new features and functions in an attempt to rejuvenate the product. This keeps the product in maturity for longer, staving off decline.
  2. Harvest the product by ending production so inventory can be cleared out. This maximizes profitability once the decline phase has begun.
  3. Discontinue the product and reuse or liquidate remaining parts. This is the final stage before the product is completely kaput. Much like a private equity firm strips a company for parts, so too can companies strip product lines to leech the final bit of profit out of them.

Products in the decline are not very profitable, so companies are usually unwilling to invest a lot of resources at this stage of the game. The goal is to get the product off the company’s books as quickly and profitably as possible.

Product end of life for 30+ year lifespans

So that’s the approach in theory. But how does this translate to practice?

In a word: badly.

First, products aren’t designed at the start to make them easy to retire at the end.

Modular design with parts that can be easily repurposed for other projects is rarely a concern during design and development. Plus, keeping parts consistent over the course of a decade is nearly impossible, and even tracking what goes where to look for efficiencies is hard.

Second, the first part of decline is extending the functions and features of a product. But to maximize profitability as products decline, organizations need to “aggressively prune unprofitable varieties.”

Organizations need to “aggressively prune unprofitable varieties”

Basically, they need to expand their product variation… and then immediately contract it again.

The combination means that manufacturers are unwilling to invest fully in either process.

Finally, there’s the persistent issue of product maintenance. How long do companies support discontinued products? How long do they offer support and replacement parts, especially as products with long lifespans regularly have a vibrant reseller market.

These problems are challenging for every product retirement. But they become much worse as the functional product life gets longer and longer. For something like a pivot irrigation system that might last 30 years (or more!), it can leave companies with low profitability and large maintenance and support costs.

And as products incorporate more smart technology, the pace of decline will only intensify.

Is there a better solution for product end of life?

Like most things, we think the answer lies in data. By connecting product data and storing it effectively over time, organizations can maximize their product end of life profitability.

Using product data to extend product maturity

As Theodore Levitt put it back in 1965, product decline is marked by “boredom and gradual euthanasia, and the only cases where there is any relief… are where styling and fashion play some constantly revivifying role.”

product decline is marked by “boredom and gradual euthanasia”

And for most products with long lifespans, this isn’t the case. In the instance of industrial products, it’s really not the case. For instance, a city doesn’t buy new infrastructure solutions based on what’s trending. They buy based on what works.

(The interesting exception is cars, where automakers invest in both a resale market and massive ad spends to create consumer urgency and capitalize on trends.)

So how can manufacturers extend the product maturity stage to increase product lifetime profitability?

Smart technology.

Increasingly, manufacturers rely on smart technology to differentiate. IoT devices, IIoT, and industry 4.0, as well as consumer expectations around efficiency and price, make incorporating data collection and transmission functionality critical to industrial products.

The challenge is ensuring backwards compatibility with plug and play smart add-ons. And that’s where product data can help.

First, if you have full product data archived, including documented BOMs, version controlled CAD, and project data like associated emails and spreadsheets, then it’s far easier to find commonalities that let you build an add-on once and attach it to a variety of different versions.

Second, smart technology is a big reason for customers to upgrade. While you do run the risk of cannibalizing your new buyer market share, add ons with reverse compatability get previously-dormant customers back through your front door, increasing their lifetime value and the value of the product.

And finally, if you’re deploying smart technology, odds are you’re not building it yourself. You can reduce the cost spent on tech suppliers, or make manufacturing cheaper if you’re doing it yourself by providing a much fuller picture of how products are made instead of trying to reverse engineer to guarantee integration capability.

Product data increases harvesting efficiency

Streamlined product data management via integrated PDM/PLM solutions make harvesting more efficient by keeping a clear record of product data throughout the lifecycle. In doing so, all changes in a product’s history are accessible across the value chain via the cloud.

Product data streamlines reuse and liquidation

Leveraging carefully organized product data, where each part can be identified and seen where its used (e.g. galvanized steel 5″ diameter piping is used in product X, Y, and Z).

Over time, new products can be designed that make heavy use of existing inventory. This also means that older product lines can be cost-effectively maintained over time, postponing the harvesting and discontinuing stages of product end of life and, when liquidation is a reality, increasing the value of those returns. Cloud PLM is especially useful here because:

  • During product redesign, a single name for each product part is used across the lifecycle so understanding and building upon a product’s design is simple.
  • During actual discontinuation, knowing exactly what parts various product versions contained streamlines inventory reallocation.

Wrap Up

End of life is challenging for manufacturers because data gets lost over the course of the product lifecycle. By the time a product is at the end of its life, manufacturers are scrambling to locate the information needed to phase out the product.

But it doesn’t have to be this way. By leveraging product data effectively over the long term, manufacturers can:

  • Postpone the end of life stage by ensuring the backwards compatibility of new product innovations.
  • Make product harvesting more cost-effective.
  • Streamline product reuse and liquidation processes.

With efficient product data and product lifecycle management, manufacturers can vastly improve their product profitability — more than paying for the technology investment.

Image credit: Nathaniel Flowers via Unsplash