Optimizing End-of-Life Product Management for the Process Industry

PLM is about governing profitability, including end-of-life product management

(Image credit: UNSPLASH)

This blog is the final in a five-part series by guest blogger Lionel Grealou, consultant and founder of Xlifecycle Ltd. and author of the virtual+digital blog. In part 1, Lionel discussed the pivotal role of PLM data in enhancing the reliability and insights of R&D and supply chain decisions. In part 2, he considered how PLM capabilities are essential for manufacturers to accelerate time-to-market and launch products “right the first time.” In part 3, Lionel explored why PLM is about adapting to consumer behaviors while maintaining regulatory compliance. In part 4, he discusses how concurrent engineering accelerates product development and how contract manufacturing offers flexibility and cost savings.

Today’s post examines the various aspects of product end-of-life strategies and how integrated PLM data management can facilitate the governance of profitability.

In the Consumer Packaged Goods (CPG) industry, delisting products involves a strategic decision-making process aimed at removing them from the market or discontinuing their availability to introduce new variations or respond to external market conditions. This can arise for various reasons, such as declining demand, technological obsolescence, regulatory changes, or simply maintaining an optimal/most profitable size of line for the product line.

Unplanned or replanned delisting can also be a costly consequence of a sub-optimum New Product Introduction (NPI) strategy—potentially affecting both portfolio profitability and consumer credibility if not commercially justified. Broadly speaking, product end-of-life strategies must be defined during the early product development phase to maintain a coherent innovation portfolio strategy.

In this post, I delve into the multifaceted aspects of product end-of-life strategies and how integrated PLM data management can facilitate the governance of profitability—encompassing delisting, write-offs, downstream change management, and broader sustainability implications.

Driving effective SKU delisting strategies

To implement effective delisting strategies, CPG companies must understand market trends and customer preferences. By analyzing data on consumer behavior and market dynamics through end-to-end PLM data, businesses can make informed decisions about which products to delist. This proactive approach ensures that only underperforming or outdated products are removed from the market, making way for innovative and in-demand alternatives.

Defining the implications of delisting a specific product batch requires key insights into the product, Stock Keeping Unit (SKU), and overall portfolio performance. PLM solutions must drive such insights across product categories and variants, supply chains, NPI deliverables, associated procurement, and financial metrics. In addition to understanding market trends, evaluating the impact of delisting on suppliers, distributors, and other stakeholders is crucial. Effective SKU phase-in/phase-out strategies should consider the entire supply chain, ensuring smooth transitions and maintaining strong relationships with all involved parties.

The rationale for CPG product delisting can be diverse; several factors must be considered as part of the decision-making, such as:

1. What are the opportunities and risks to the products in-market, and how to maximize shelf life and profits?
2. What will be the delisting sequence across markets, from one market to another, for a given SKU or product variant?
3. What will be the commercial impacts, from revenue growth, logistics, product recycling, or repurposing?
4. What will the sustainability implications be, along with the associated financial impacts on the overall product portfolio?
5. How to anticipate delisting requirements and ensure accurate demand forecasting?

By managing these transitions thoughtfully, CPG companies can minimize disruption and maintain trust and cooperation from their partners. PLM processes and tools must contribute to linking early product development decisions and supply chain capabilities in line with total lifecycle costs. It is also a matter of process adherence, unambiguous and rigorous gateway approval—up to SKU delisting impact assessment and sign-off to mitigate commercial impacts from write-offs.

Managing write-offs and financial implications

Write-offs, while often viewed as a financial maneuver, are deeply intertwined with product lifecycle management and end-of-life considerations. For instance, this includes determining the optimal timing for discontinuing underperforming products to minimize financial loss, deciding how to repurpose or recycle materials to reduce waste, and managing inventory to avoid excess stock that could lead to costly write-offs. Write-offs can also be triggered by non-compliant products, hence the importance of driving traceable quality and regulatory alignment. Properly managed write-offs can help companies reflect changing market conditions and reallocate resources more effectively. Write-offs can be triggered at various stages of the innovation process, from prototype development and raw material write-offs to more costly and visible end-market delisting due to strategic portfolio changes or tactical mitigation. Governing SKU delisting involves using PLM systems to track commercial performance, such as revenue volumes, profitability margins, customer feedback, and market demand alignment, and identify when products are no longer viable, allowing for timely and strategic write-offs.

Implementing proper write-off procedures also ensures transparency and accountability. By maintaining clear records and following established protocols, companies can demonstrate their commitment to responsible financial management. This transparency not only helps in managing internal resources but also enhances the company’s reputation with investors and other stakeholders. Effective write-off management, supported by PLM governing protocols, thus plays a critical role in aligning financial practices with sustainable product lifecycle management, reinforcing trust, and promoting long-term profitability.

From a PLM perspective, tracking write-offs implies meticulously monitoring product performance and lifecycle stages to ensure timely and strategic financial decisions, enhancing resource allocation and material utilization, and maintaining transparency and accountability across the organization. PLM data relationships provide valuable insights to help CPG companies track and mitigate write-offs by facilitating cross-functional impact assessment across engineering, manufacturing, finance, sales and marketing, or procurement-related decisions.

Managing relationships across stakeholder groups during the end-of-life phase is essential to ensure minimal disruption. Downstream change management involves engaging suppliers, distributors, and customers to communicate changes effectively and manage expectations. By developing comprehensive communication strategies, companies can keep stakeholders informed and involved, reducing the risk of misunderstandings and maintaining strong partnerships. Utilizing PLM systems for these processes ensures that all relevant data is accessible, up-to-date, and can be shared transparently among stakeholders.

Effective stakeholder engagement and risk mitigation strategies are also critical. By anticipating potential disruptions and preparing contingency plans, companies can navigate the challenges of end-of-life transitions more smoothly. PLM tools can facilitate the identification of risks and the development of robust mitigation strategies by providing insights into supply chain dynamics and potential bottlenecks. This proactive approach helps maintain trust and goodwill, ensuring that all parties are aligned and supportive of the company’s strategic goals.

Aligning end-of-life and sustainability objectives

PLM repositories support effective documentation and tracking of changes, making it easier to manage and review the end-of-life process. This ensures that any issues can be quickly identified and addressed, further reducing the risk of disruptions and maintaining the efficiency of the supply chain.

A McKinsey article published in 2023 highlighted that “Revenue growth is good. Profitable growth is better. Profitable growth that advances ESG priorities is best.” Among several case studies, the study discussed the importance of driving environmental, social, and corporate governance (ESG) and associated sustainability objectives in an integral manner as part of the product innovation cycles. Integrating end-of-life strategies with sustainability goals is crucial for reducing waste and promoting recycling. By designing products with their entire lifecycle in mind, companies can ensure that materials are reused and recycled, contributing to a circular economy.

Balancing the delisting of SKUs with the introduction of new products is essential to managing commercial risks and opportunities effectively. By using PLM systems to analyze market needs and sustainability objectives, companies can make strategic decisions that support both profitability and environmental goals. This holistic approach ensures that end-of-life product management contributes to the broader goal of sustainable growth, keeping our planet clean and resources efficiently utilized.