The Smith Company manufactures various electronic assemblies that it sells primarily to computer manufacturers. Smith’s reputation has been built on quality, timely delivery, and products that are consistently on the cutting edge of technology. Smith’s business is fast paced. The typical product has a short life; the product is in development for about a year and in the growth stage, with sometimes spectacular growth, for about a year. Each product then experiences a rapid decline in sales as new products become available. Smith’s competitive strategy requires a reliable stream of new products to be developed each year. This is the only way that the company can overcome the threat of product obsolescence. Although the products go through the first half of the product life cycle like products in other industries, they do not go through the second half of the product life cycle in a similar manner. Smith’s products never reach the mature product or declining product stage. Toward the end of the growth stage, products just die as new ones are introduced.
a. In the competitive market facing Smith Company, what would be key considerations in production and inventory control?
b. How would the threat of immediate product obsolescence affect Smith’s practices in purchasing product components and materials?
c. How would the threat of product obsolescence affect the EPR for a typical product produced by Smith Company?