When you’re dealing with a legacy product, there is an all new set of cost saving opportunities to explore.
This post is the conclusion to our Product Rescue series where we walked through the entire product development process. If you’re just joining us, I encourage you to go check out the rest of the series, starting with Part 1: Discovery.
End of Life
End of life sounds a little grim, especially since a lot of companies are happy to move on to new products, but it’s true, products have a life cycle like anything else and when they reach the end…there is still work to be done.
Costs go up
back when you were pumping out a lot of these , your vendors loved you. They were slashing prices and cutting you deals right and left…now that your volumes have decreased…and the components are outdated…those discounts are long gone.
What’s worse than paying 2x as much for a component? Not being able to find that component…
It happens…a LOT…
Suppliers have their own costs to worry about and when certain products stop producing a profit, they have to let them go.
New products take your attention away
Ideally, as one product fades away, 2 more take it’s place…hypothetically, there would also be 2 more of you to take on the new responsibility…but that rarely happens. So you’ve got two new products ramping up, but this oldy-but-goody still has some life left in her. What do you do?
Your costs are up, suppliers are dropping like flies, and you’ve got two new products fighting for resources on your production floor…but the boss says we have to keep filling orders on that legacy product for at least 5 more years…what now?
The first option is to…
You can start by consolidating components. We talked about this a bit in the last post, but it warrants another mention. many times, new products have hit the market since your initial design. This means that something that used to be custom…now has an off the shelf alternative…or maybe there is a new product that combines 3 of your components into one allowing you to save money, weight, and increase reliability.
You can also consolidate suppliers. While some leave, others have expanded their offerings and might be willing to offer you discounts by bundling your orders to include components that you used to source elsewhere.
Lots of companies frown on outsourcing for various reasons like intellectual property concerns or bad past experiences. In reality, outsourcing can be a very cost effective solution for legacy parts. A reputable manufacturer will have no problem signing an NDA, non-compete, or any other combination of legal forms your lawyer recommends.
The overhead at a smaller manufacturer will be lower and they will be assuming the risks of production.
An added bonus of shifting a legacy product to a new manufacturer is the opportunity for added value. A fresh set of eyes on an outdated product might bring light to other cost saving opportunities or even feature enhancements that could extend the life of the product in the marketplace.
Treating a product the same throughout production into legacy phase will undoubtedly cost you money. Learn how to identify the end of life phase and take necessary steps to ensure efficiency until the very end.
Where do we fit?
Ehren-Haus is the quintessential small specialty manufacturer. While we work primarily with highly custom products from the beginning of their life cycle, we also do a lot of work helping with alternate sourcing support. Currently, we are supporting the navy with some very complex flex circuit cable assemblies that are critical to the functionality of an aircraft – but the original manufacturer was not interested in supporting the “outdated” technology in the long term. We stepped in, found ways to get the price AND lead times lowered and are now providing a great alternative for both the DoD and the OEM.
If you’re looking to maximize profits on an older product, let’s talk.
Well guys, that’s the end of the Product Rescue series. I hope it was helpful for you. We definitely enjoyed pooling our experiences and tips together. If there are other topics that you would like us to talk about or expand upon, we would love to hear from you. You can email us at firstname.lastname@example.org
Want to stay in the loop on Ehren-Haus news and other industry insights like these? Sign up below to receive our weekly blog updates.