What Is Product Lifecycle Management (PLM)?
Product Lifecycle Management (PLM) is the management of a product as it progresses through the standard phases of its life: development and introduction, growth, maturity/stability, and decline.
This management encompasses both the manufacturing and marketing aspects of the product. The product life cycle concept serves as an important guide for business decision-making, influencing choices related to pricing, promotion, and strategic decisions such as expansion or cost-cutting.
Understanding Product Lifecycle Management (PLM)
Product lifecycle management involves the collaboration of several companies, departments, and employees engaged in the product’s production. The primary objective is to optimise their activities, ultimately leading to the creation of a product that surpasses competitors, is highly profitable, and remains viable as long as consumer demand and technology permit.
PLM systems play a key role in helping organisations navigate the growing complexity and engineering challenges associated with developing new products. They are considered one of the four key pillars in a manufacturing corporation’s information technology structure, alongside managing client communications (Customer Relationship Management), dealings with suppliers (Supply Chain Management), and internal resources (Enterprise Resource Planning).
Identifying the product’s life cycle stage determines the appropriate marketing strategy. For instance, a new product in the introduction stage requires explanation, while a mature product benefits from differentiation. PLM can influence fundamental aspects of a product, extending its growth potential even after reaching maturity, particularly through updates or enhancements.
History of Product Lifecycle Management
The concept of a product undergoing distinct life stages and needing effective management, originated as early as 1931. Around 1957, an employee at Booz Allen Hamilton, the advertising agency, proposed a five-step life cycle model for goods. This model started with the introduction phase, progressed through growth and maturity, and ultimately reached saturation and decline.
A significant moment in the application of modern PLM occurred in 1985 with American Motors Corporation (AMC). Faced with the challenge of expediting its product development process to compete more effectively against larger competitors, AMC, despite budget constraints, focused on enhancing the life cycle of key products, particularly Jeeps. Following this strategy, after launching the compact Jeep Cherokee, a vehicle that played a key role in establishing the modern Sport Utility Vehicle (SUV) market, AMC initiated the development of a new model that later debuted as the Jeep Grand Cherokee.
The initial step in expediting product development was the introduction of computer-aided design (CAD) software systems, enhancing the efficiency of engineers. The subsequent effort involved implementing a communication system that facilitated faster conflict resolution and reduced costly engineering changes, thanks to a centralised database housing all drawings and documents.
The effectiveness of product data management was evident, prompting the expansion of the system throughout the enterprise after Chrysler acquired AMC. This interconnected everyone involved in designing and building products. Through the adoption of PLM technology, Chrysler emerged as the auto industry’s lowest-cost producer by the mid-1990s.
Stages of a Product
Companies may employ varying categorisations for each stage of a product. Nevertheless, in general, most products undergo several distinct stages throughout their life cycle.
The concept stage marks the inception of a new product, involving the generation of initial ideas and strategic planning. Led predominantly by research and development departments, this stage sets the foundation for the product life cycle by conducting market research, identifying customer needs, and assessing the product’s feasibility.
In the design stage, planning, development, and testing take place. This includes the creation of product prototypes, refinement of designs, and ensuring compliance with regulatory and safety standards. Companies commit substantial research and development resources in this stage, particularly when dealing with innovative products that have never existed before.
Confident in the product’s viability and market demand, the production stage begins. This involves the manufacturing process, encompassing sourcing raw materials, assembling components, and testing the final product. By this point, the product should be well-defined, and adjustments to the design should be minimal.
After production, it transitions to the sales stage, involving promotional activities and selling efforts. Companies deploy advertising, sales promotions, and pricing strategies to connect with customers. The sales and production stages often run concurrently as companies endeavour to forecast and meet market demand.
The support stage focuses on providing ongoing assistance to customers post-purchase. This includes customer service, warranties, repairs, and additional services aimed at enhancing user experience, such as tutorials for using new technology.
The product life cycle concludes in the retirement stage, triggered by factors such as the introduction of superior competitor products or a decline in market demand. This stage addresses the end-of-life aspects, including disposal, recycling, or repurposing of the product. Successful products may undergo enhancements through future iterations, exemplified by successive generations of products.
Benefits of PLM
Effective product lifecycle management offers numerous advantages, including speeding up the product’s time-to-market, introducing a higher quality product, improving product safety, expanding sales opportunities, and minimising errors and waste. Dedicated software solutions are available to facilitate PLM, incorporating features like document management, design integration, and process management.
The primary goal of PLM is to enhance product quality and reliability. A more structured planning and innovation process can potentially reduce the need for extensive prototyping, leading to more accurate and timely requests for quotes (RFQ).
Organisations strategically managing the retirement stage may realise cost savings through information reuse. This proactive approach enables companies to plan ahead, minimising waste and reducing material costs by gaining a deeper understanding of each product’s current phase in the life cycle.
Elements of PLM
Product lifecycle management needs extensive collaboration among different departments throughout the entire lifespan of a product.
Starting with product data management (PDM), the initial phase involves overseeing all product-related data, including designs, specifications, bills of materials, and engineering change orders. This streamlined process facilitates smoother collaboration among various departments as a product progresses through its stages.
Additionally, a product design repository is often essential for this process. This repository houses information pertaining to the creation of new products, ideas, designs, prototypes, and the tests conducted on each of them.
Given the diverse sources of goods throughout the entire life cycle, PLM is closely intertwined with supply chain management. This ensures the company’s ability to procure, plan, gather, and distribute resources regardless of the product’s current stage.
In the later stages of product use, multiple elements require consideration. Sales and marketing departments must engage in collaboration to formulate effective promotion and selling strategies. This may coincide with service and support offerings, especially during the transition away from a product or when end-of-life incentives are incorporated into sales. Furthermore, there may be a need for recycling or redistribution services for items to be disposed of with environmental considerations.
Measuring Product Life Cycles
Companies often need to employ a combination of measurement methods to determine the optimal time to transition a product from one stage to the next. This becomes especially significant after a product has been launched, requiring the company to decide when to phase out the offering. Different measurement methods can be used, including:
- Sales Data. Examining the sales data over time is a fundamental approach to gauge a product’s life cycle. Sales trends provide insights into whether a product is gaining popularity, reaching a plateau, or declining. Such information can guide a company in deciding when to scale down production, marketing efforts, or product offerings. While most companies focus on product revenue, it’s necessary to consider costs as a contributing factor.
- Customer Feedback. Valuable insights into a product’s life cycle can be gleaned from customer feedback. Positive early feedback may indicate growth potential, whereas negative feedback later in the life cycle may signal decline. Customers often highlight product shortcomings, offering clues as to whether a new iteration could address unmet consumer needs.
- Competitor Analysis. Monitoring competitors is another effective method for measuring a product’s lifecycle. Changes in the market, such as the introduction of new products or the obsolescence of others, can impact a product’s life cycle. If rival companies offer superior, faster, or more cost-effective alternatives, it may be time to reassess your product. Specific measurements could include analysing profit margins or assessing reviews related to innovation.
- Quality of Output. Companies can assess their output to determine the continued viability of a product. By using metrics like the quality of output, production efficiency, or product waste, a company can gauge whether a different manufacturing approach would be more efficient.
- Warranty Claims/Returns. Persistent issues, as evidenced by warranty claims, repair requests, dissatisfied reviews, and product returns, may signal the need for a reassessment of the product. Consistent breakdowns or repair needs suggest potential shortcomings that warrant consideration in the evaluation of the product’s ongoing viability.
The Future of Product Lifecycle Management
The dynamics of product lifecycle management are poised to evolve as products and their respective stages undergo transformations over time. With the emergence of new technologies and shifts in consumer preferences, PLM is likely to adapt to these changes.
One significant element that holds the potential for future disruption is the ongoing digital transformation of information. Using artificial intelligence, machine learning, or the Internet of Things, companies can now gather and analyse data with unprecedented efficiency at every stage of the product life cycle. This technological advancement is set to empower companies to optimise performance and reduce expenses in the future.
Advancements in technology also foster improved communication, fostering a more collaborative approach to product development and management. Cross-functional teams now work seamlessly together, using real-time tools for strategic decision-making. These tools facilitate the decision-making for easier collaboration between team members regardless of their geographical locations.
As environmental awareness grows among consumers, companies are better positioned to respond to sustainability demands. Product lifecycle management systems can play a key role in supporting this trend by offering tools to measure and manage sustainability throughout the entire product life cycle, from design to end-of-life disposal. This includes the development of smart, scalable methods for measuring waste and environmental impacts, as well as cleaner and more efficient ways to transfer products across the life cycle to consumers.
Product lifecycle management involves overseeing the complete journey of a product, from its initial conception and design through manufacturing to its eventual retirement and disposal. Throughout this lifecycle, the product undergoes various stages, each requiring effective management across departments. The primary objective of PLM is to enhance the development process, elevate product quality, minimise time-to-market, and boost overall profitability.
What are the distinctions between PLM and PPM?
Product lifecycle management is primarily concerned with monitoring various stages in a product’s life. It helps professionals to oversee the production timeline and processes. On the other hand, product portfolio management (PPM) focuses on determining which products to develop, identifying successful ones, and deciding when it might be appropriate to phase out certain products. PPM aids businesses in recognising successful products and determining where to allocate emphasis.
Why do PLM projects encounter challenges?
The product lifecycle management process involves substantial estimation and projection requirements. For instance, companies must predict the sales of a new, innovative product. Challenges may arise if a company is excessively optimistic, receives inaccurate data from market participants, or underestimates the complexities of the manufacturing process. The success of a project remains uncertain until the product is introduced to the market, and sales figures begin to materialise.
DISCLAIMER: This article is for informational purposes only and is not meant to be official business advice. BARTERCARD has no relationships with any company mentioned.