Controlling the development of the product portfolio and its operational impact to deliver profitable growth.
Growth and market dynamics can often automatically result in an increase in the number of product references to be managed in a company, leading to:
- Acceleration of innovation and the launching of new products
- Expansion of a customer specific product range
- International development and adaptation to local requirements and standards
- Successive acquisitions of subsidiaries and their product portfolios
The dramatic increase in the number of product references has a direct impact on the company’s operational management, on various levels: acquisitions, industrial operations, and supply chain.
In fact, the proliferation of the number of product references results in a decrease of unit volumes, which leads to higher production costs and less leverage with suppliers. Downstream, this means a much more complex management of demand planning and an inevitable increase in the volume of stock, and even unsold stock.
To meet this challenge, companies have to pursue two avenues of action:
- Control the development of their product portfolio, by reconciling the sales and marketing objectives with their operational impact
- Manage the operations in order to control the operational impact of this complexity
1. Control the development of the product portfolio
This is a complicated issue as it is cross-functional in nature and dependent on marketing, commercial, and production requirements. In this context, the following factors are the key to success:
- A process of negotiation has to be introduced for the introduction and retirement of products. This process must encompass the various commercial functions (Marketing and Sales) and the operational functions (Manufacturing, R&D, Procurement, and the Supply Chain)
- The initiative must be based on quantified elements (reference profitability, the cost of complexity, etc.) and factual elements in order to facilitate the negotiation
- The initiative must first be applied to a pilot area in order to establish the feasibility of the approach and gain the trust of the various functions involved
- The initiative has to be supported by the company’s top management, and common objectives have to be assigned to the various departments
2. Managing Operations to control the operational impacts of the complexity
The company must endeavor to increase agility by organizing the operations around increasingly large product ranges. These levers are complex and bring several functions into play.
- Procurement and product development levers:
- Harmonize the components and raw materials throughout the various products
- Rationalize supplier panels
- Implement delayed product differentiation with standardization and modularization
- Supply Chain and operational levers:
- Specialize production sites according to the type of product
- On-site final operations
- Separate planning for semi-finished and finished products
- Standardize packaging
Because the reduction of complexity is asignificant source of performance, Argon Consulting helps its clients with initiatives to rationalize service and product portfolios, as well as the development of a process that ensures the durability of these initiatives.
We can provide support in the following ways:
- We carry out an analysis of the product portfolios and its contribution to the company’s revenues
- We analyze the diversity of the subassemblies and components, and the potential for simplification
- We develop commercial, procurement, and industrial action plans to implement and benefit from the rationalization of the products and components