A product rationalization project part of a portfolio optimization program

Revision as of 11:49, 10 September 2016

Product proliferation enables organization to serve customers´ varying requirements and needs as well as attracting new customers. By expanding the product portfolio organizations can capture new revenue sources and build and sustain a competitive advantage. Some organizations pursue the strategy of diversifying the product portfolio without fully understanding the extent to which implications can occur e.g. as new product variants are added complexity increases and higher costs are introduced in the supply chain.

When the portfolio consists of too many products, it becomes critical to the cost competitiveness of the organization to effectively manage and control the products in the portfolio. Through intelligent product rationalization by focusing on incremental revenue, incremental cost and a lifecycle perspective, it is possible to minimize revenue loss but ensure significant cost reductions, hence reducing complexity in the portfolio. Additionally, prioritization and selection of products becomes essential to ensure alignment with the business strategy.

SKU rationalization is central to reduce complexity costs and thereby optimize and control the portfolio. Many companies have adopted complexity management approaches to reduce complexity costs and increase competitiveness. The aim of this article is to examine thoroughly the use of portfolio optimization in regards to SKU rationalization as a method to reduce complexity, control the portfolio and release resources. As a result, it is possible to maximize the strategic organizational goals by reinvesting in future projects to strengthen the portfolio while obeying budgetary restrictions.

Background

Why product complexity arises

The need to regain control

How to regain control

How do you know if your have complexity?

ABC analysis

Incremental revenue Incremental cost A lifecycle perspective

SKU rationalization

Step 1

Step 2

Step 3

Step 4

Implications

How to fight complexity creep

Capability building Selection and decision models Other courses of complexity

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References

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