![]() A simplification program that comprised portfolio optimization, product design, and commercial-network alignment reduced the company’s product portfolio by 25 percent while improving gross profit by 3 percent.īy leveraging the insights gained from the crisis and adding the right tools and processes, companies can actively shape a simpler, more effective product portfolio that can both reduce the burden of risk management now and better serve customers once the crisis eases. Over a three-year period, the number of SKUs it offered increased by more than 50 percent, which reduced sales per SKU by more than 30 percent and margins by about 10 percent. By providing a better customer experience and shorter lead times, the vastly reduced portfolio increased sales by 5 percent while also achieving significant operational savings.Ī third example comes from a consumer-product company, where focusing solely on increasing revenue came at the expense of profitability. In another example, a machinery company went from actively selling about 800 product variants to selling about 25. The intent was to become a leader in lowering carbon emissions, but the change also helped streamline production by replacing eight separate engine architectures on three platforms. In 2011, the Scandinavia-based automotive player decided to phase out its five- and six-cylinder engines and replace them with four- and three-cylinder engines based on a unified, modular engine architecture. The Volvo group offers a good example of the benefits of actively managing a portfolio. When polled about their planned portfolio activities, about 40 percent of senior executives attending a virtual event on product development said they were already working to reduce their product portfolios, and 44 percent planned to reallocate their R&D budgets to new products (Exhibit 1). Some companies have felt the challenges associated with an expanding portfolio for a while for others, the COVID 19 crisis has become a breaking point. Increasing profits gave companies comfortable investment cushions, and ongoing digitization and automation fueled flexibility and economies of scale. Buoyed by the long economic expansion, many businesses have strongly grown their product portfolios. There’s a constant tension between product development and its desire to create new things, operations and its focus on costs and complexities, and sales with its need to cater to customer needs in expanding the top line. Managing a product portfolio is a tricky business at the best of times. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |