Life Cycle Costing

What’s it all about?

Understanding how a products sales are going to change over time as demand for it changes and how profits need to be made to cover the cost of developing and making the product and eventually ‘retiring’ it and the facilities associated with it.

Download the PDF file .

 

Watch this.

I’ve got this video in the Pricing page too, but it’s here for the discussion of the Product Life Cycle from 12 minutes 45 seconds.

Further reading

The Decline stage.

I am old enough to remember VHS and Betamax coming in. I wouldn’t be surprised if many of you have never even dealt with video tape. that shows a short life cycle for a product, just 40 years.

What surprised me though was I thought Betamax had gone a long time ago. this does show that products can exist for a long time in the Decline stage. Presumably, Betamax tapes have been selling and making profit for Sony for most of this long decline.

http://www.theguardian.com/technology/2015/nov/10/betamax-dead-long-live-vhs-sony-end-prodution

There were suggestions that paper based books were in the decline phase as purchasers switched to e-books.

It now looks like those predictions may have been premature.

https://www.theguardian.com/books/2017/mar/17/paperback-books-sales-outperform-digital-titles-amazon-ebooks

A good example of a product in the maturity stage or going in to the decline stage?

I’d been myself to a PC retailer (thats what they called themselves anyway) that didn’t have PCs (only gaming machines and laptops) the day before seeing this article for the very reason quoted – the need to replace a PC.

This shows that declines can be reversed, even if it may only be temporarily, as existing user replace items. Next time I need a new computer it might be a laptop for me or some completely new product.

The PC bounces back as shipments rise for first time in five years

The Life Cycle of music formats, and now song length.

I’ve seen many changes and got several unplayable forms of music (no, not was cylinders).

http://www.independent.co.uk/arts-entertainment/music/features/the-future-of-songwriting-how-streaming-is-changing-everything-we-know-about-making-music-10293084.html

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Continuing the story of changing formats.. the death of the album is predicted again…

http://www.bbc.co.uk/news/entertainment-arts-37444038

Changing tastes and population size in a age group affect clubbing.

Changing attitudes affects a business. The other issue facing them is a change in the population demographics with fewer people in their target age range.

https://www.theguardian.com/music/2016/sep/24/uk-nightclub-visits-fall-by-a-quarter-in-five-years

Life Cycle Costing in practice.

Its application in building management.

http://www.businesswire.com/news/home/20160211005080/en/Gordian-Group-Extends-Innovative-Solutions-Products

Those responsible for property maintenance are very interested in the life cycle of their buildings. lengthy article, but see the part about Life Cycle Costing particularly.

http://facilityexecutive.com/2016/03/preventive-maintenance-facility-management/

Possible Written Questions.

(No indication of marks – the more marks a question gets, the more you are expected to write – detail that is, not just words!) If you can’t answer these, you need to do some more reading. I do ‘find’ questions elsewhere, so these aren’t all questions I have used myself.

Discuss the traditional four stages associated with the life cycle of any product and the additional two stages which may be included.

Discuss all the stages of a product life cycle based on product life cycle theory.

Assess the usefulness of life cycle costing in evaluating the profitability of products.