in this article, i will try to provide insight on the topic of how to de-couple complexity by using a structured method and approach to product rationalization. the ability of an organization to manage product complexity and proliferation generally results in cost avoidance and better control of operations. it started with a simple e-mail from our global director of manufacturing, wherein he asked his supply chain managers to provide him a list of items that gave us the most headaches to manage and what would we gain or lose if we eliminated them. the most weighting i gave was to the individual gross margin contribution and the marketing core product strategy and replaceability questions.
he let us know that he would be the sponsor for the project and a high-level team needed to be formed. this was obviously the one that the team thought was easier to begin with and would not require any customer trials. these were the items that the team thought they needed more time to convince the customers and would require trials. now that we have a successfully implemented the project, how are we to make sure that what was done sticks? one of the key measures of success for this effort is to have a solid control plan in place that keeps the proliferation from creeping in again.
that opportunity is the rationalization of the product line and all component parts. in this process, products will be eliminated unless justified through the business case. we find that the benefits of a successful rationalization effort impact all major areas of a company as follows: manufacturing, product development and engineering. in product development/engineering, a reduced product line will provide the opportunity to improve “parts commonality” and curtail the “not invented here syndrome” prevalent in many corporations. inventory control and logistics will improve with fewer products to manage. in summary, a company can get much closer to the goal of resource optimization, leading to increased productivity, cash flows and profits.
as long as all products (skus) are treated equally, the analysis will be valid. ), opportunities for price increases and ongoing product support requirements in the marketplace. the teams should present their recommendations to management and be empowered to implement the approved actions. resources will be optimized to improve efficiencies and customer service. policies will be in place to maintain a simplified product offering. he led cross-functional teams focused on improving margins and inventory management in a multi-national environment during the company’s successful turnaround in 1991-92. his team achieved in excess of $300 million in financial benefits in 20 months.
how to de-couple complexity by using a structured method and approach to product this rationalization process provides a framework to focus resources and reduce costs. a reduced product offering will simplify production processes, reduce costs, enhance material management and increase economies of scale in purchasing. sales increases through product rationalization or opportunities for cost reductions throughout the supply 3 strategies based on gmroi. the endgame for any strategy based on gmroi is the same., product rationalization matrix, product rationalization matrix, product rationalization template, product rationalization meaning, product line rationalization meaning.
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