Lifecycles Part 2
Well, that title is not super exciting- but the topic of lifecycles and supply chain definitely IS!
I spend an unreasonable amount of time thinking about product lifecycles. How each product is launched with the highest hopes and how very many products are launched each year out into the marketplace… hoping hoping hoping to gain traction and sell through. If you peruse an inventory liquidation site, it’s enough to keep you up at night thinking about how many products end up in a state of excess. The importance of lifecycles cannot be overstated.
Each of the 4 main lifecycles (New, Active, Phase-Out, Discontinued)* have their own unique supply strategy to allow for flexibility, stability, and controlled movements. We are going to start with the last one in this post- Discontinuations.
The more time spent working within the off-market or 2nd life channel for discontinued inventory, the more apparent it became how more critical determining the lifecycle of the SKU at inception is. As soon as a SKU is launched, its exit plan should also be mapped out. Will this SKU be available for off-price sales? If so- how much is safe to do without impacting brand integrity? Will it be donated? What donation channels are appropriate and how many units can the partner take? Can it be repurposed? Or should the company set aside reserves for disposal (the fastest and most controversial way to deal with excess/obsolete inventory). Knowing all this up front keeps a company responsible and aware during all parts of the planning during the life of a SKU. It also prevents those (un)fun discussions about what to do with all the inventory that has suddenly been dumped into the obsolete classification.
We talked last time of not being surprised during any stage of the lifecycle. This planning process is all about understanding the movements that occur at each stage and how to prepare. When a SKU is officially discontinued, the ideal is 0 stock leftover. And I am hounding on this relentlessly- but here it goes again—— planning up front the entire lifecycle of a SKU including the exit plan makes the goal of 0 units a lot more likely than reacting in the moment to declining sales. As F. Covey said, “Begin with the end in mind”.
*There are a variety of other terms that are also used to describe these 4 lifecycles