IISWBM

PGDSCLM Paper 201

Module I – Marketing in SC&LM

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 Product Life Cycle – Barriers to
Chain Integration

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 Product Life Cycle Management
▪ Product Development – When the company finds and develops
a new product idea

▪ Introduction

▪ Growth

▪ Maturity

▪ Decline
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 Product Life Cycle – Different Stages

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 Introduction Stage

▪ The product is introduced into the market

▪ A new product in the market
▪ An old product in the new market
▪ Demand is low (customers not fully aware of the product)
▪ To invest heavily in advertisement
▪ Utmost care to be taken to avoid product failure

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 Development Stage
▪ Market : Unknown, Uncertain, Unknowable risks

▪ Demand has to be “created”

▪ “Used apple policy” – to be the first company to seize an

opportunity or be a follower

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 Growth Stage
▪ Gradual rise in its sales

▪ Potential competitors jump into the fray

▪ Product / brand differentiation begins to develop

▪ Easy to open new distribution channels and retail outlets (due to

increase in consumer acceptance)

▪ Push to lower prices

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 Maturity Stage
▪ Market saturation
▪ Most consumers already owning or using the product
▪ Sales will grow, but at par with population
▪ Price competition becomes intense
▪ Finer differentiation in the product / brand becomes important
▪ Ideal to hold the distribution outlets, retain shelf space and
secure more intensive distribution

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 Decline Stage
▪ Market maturity tapers off and comes to an end

▪ Difficult to weather the competitive storm

▪ Demand decline

▪ Over capacity

▪ Prices and margins get depressed

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 Product Life Cycle – Volume / Profit Analysis

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 Bullwhip Effect

A phenomenon where
demand changes at the end
of a supply chain lead to
inventory fluctuations along
the chain.

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 Bullwhip Effect – Example
Customer Retailer
(8 units) (10 units)

Manufacturer Distributor
(40 units) (20 units)

So, 40 units produced for a demand of 8 units. Retailer has to drop

prices to sell extra units.

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 Causes of Bullwhip Effect
1. Lack of Communication
Managers of different links of a supply chain can perceive a product
demand differently from others.

2. Free Return Policies

Customers may overstate demands due to shortages and then
cancel when the supply becomes adequate again.

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 Causes of Bullwhip Effect (contd)
3. Order Batching
Companies may not place an order with their suppliers and
accumulate for weekly or even monthly orders. Any surge or lack
of demand later, creates variability in demand.

4. Price Variations
Special discounts and other cost changes can impact regular
buying patterns leading to uneven production and distorted
demand information.

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 Causes of Bullwhip Effect (contd)

5. Demand Information
Information of past demand to estimate current demand may be
problematic if it doesn’t take into account any fluctuation that may
occur in demand over a period of time.

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 Effective Supply Chain Management - Barriers

1. Internal and external turf wars :

Conflicts within the departments and within the organisations are
fundamental barrier to SC collaboration. Generally, managers of
departments work and decide independent of impact of the
decision on other departments and on the whole organisation.

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 Barriers (contd)
2. Poor SCM planning :
SCM begins with customer and integrates all activities from
procurement of raw material to the distribution of finished
product. SCM may fail due to insufficient forecasting and poor
planning process.

3. Lack of SCM Vision :

Chain partners may not have common and clear vision of SCM and
hold different beliefs and values; supplier and customer do not
share common goal.
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 Barriers (contd)
4. Lack of Trust :
Channel partners may not share information openly because of
fear of divulging their weaknesses.

5. Executive Commitment :
Almost all the barriers such as incompatible technology, conflict
among supply chain members, lack of employee willingness to
share information can only be overcome with support from the
top management.

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 Barriers (contd)
6. IT Deficiencies :
IT is like a nerve system of SCM. Lack of integrated information
system is a major barrier.

7. Organisational Structure / Culture :

An organisation’s own culture and structure may create difficulty
in collaborating with other chain partners.

8. Lack of SC performance measures :

Crucial to measure performances of SC partners.
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 Barriers (contd)
9. Lack Alliance Guidelines :
If each channel partner in the supply chain has separate plans for
activities such as production plan and schedule then there will be
no integration of processes of different channel partners.

10. Poor SCM understanding :

Employees may not have understanding of how SCM is beneficial
for the organisation and how it will benefit their job.

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 Integrating SCM with Product Life Cycles

1. Development Stage
Lack of sales revenue, may have to sustain losses that are in line
with the scale and complexity of the product to be launched

2. Introduction Stage
Very costly, relatively low volume and possible continued losses

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 Integrating SCM with Product Life Cycles
3. Growth Stage
Step up by step increasing sales emergence and increase of profit
(assuming a successful product)

4. Maturity Stage
Very low cost, sales at a peak, a reduction in product’s price –
possibly through competitive pressure, significant profitability

5. Decline Stage
Reduction in sales, continued drop in prices, reduction in profit
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 How to manage different stages
1. New Product Stage
Strategic approach needed to integrate all Supply Chain elements
and eventually progressing to a collaborative Supply Chain
▪ Evaluate various sources repeatedly
▪ Possible switching from one option to another (for example,
metal casting to plastic; less computer memory to more
computer memory)

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 How to manage different stages
1. New Product Stage (contd)
▪ To map out how a product will be manufactured (that will
require decisions on tooling, appearance, marketability, etc.)
▪ Importantly, to plan nature of the distribution process,
including eventual return process

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 How to manage different stages (contd)

2. Introduction Stage
The Supply Chain is presumably up and running, and continually
tuned
▪ Close examination of the Supply Chain to bring the start-up
cost into line
▪ Low sales volume makes managing the supply chain
comparatively easy

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 How to manage different stages (contd)
3. Growth Stage
▪ Growth is maintained to a great extent by using feedback
from customers and customer’s customer on how the
enterprise delivers and maintains the product
▪ Right logistics plan is essential to increase sales volume
▪ The right product, at the right time, with the right features,
and with right continuous support from the enterprise will
achieve success

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 How to manage different stages (contd)
4. Maturity Stage
▪ To sustain good resources, good in-bound logistics, good
warehousing, good manufacturing practice, good design,
good distribution and continued evaluation of customer
feedback
▪ Better supply chain position gives an edge over competitors
▪ A drop in price may be off set by good supply chain tuning
▪ Possibility of the greatest profitability from the product

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 How to manage different stages (contd)
5. Decline Stage
This stage should not be seen as a point where the company gives
up.
▪ Highly oiled supply chain, along with other careful practices,
may assist in extending the product
▪ To balance reduced price and lagging sales, intelligent use of
a supply chain strategy is essential
▪ This stage is also the point where a product has a chance of
rejuvenation

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