Effective Product Line Management

EFFECTIVE PRODUCT LINE

MANAGEMENT

Are you producing what you are selling?

Has poor product line management sub-optimized your manufacturing operations? Does it create reactive production and distribution planning, high operating costs, and ineffective utilization of manufacturing resourc- www.ipmcinc.com es? In manufacturing, we are trained to identify root causes and induce continuous improvement efforts to be as efficient and responsive as ALVIN DOSS demanded by the business. Too often we only look at what we control; the Director shop floor, the manufacturing environment, the plant, our focused factory, etc. It is important to step outside the familiar boundary and look to the TONY SCRIMA | PMP Sr. Project Management Consultant broader organization for inefficiency drivers. Product line management, performed in a vacuum, managed inconsistently and without consider- Integrated Project ation of how products are effectively produced, is often the root cause for Management Company, Inc. poor operational performance.

If you’re not conducting formal reviews of your portfolio, you may be creat- ing operational ineﬃciencies, increasing cost of goods sold (COGS), compromising production capacity, and fostering SKU proliferation and the corresponding steady increase of inventory-related costs. But how do you sort through it all? How do you lead change outside of your area?

Product rationalization should always be considered as an initial starting point when seeking operational improvement jointly between sales, marketing, engineering, production, and other key functions. This allows for a balanced, synergistic focus to blending the needs and wants of the business with its capabilities, capacity, and resources. Leveraging your production ability through the interrelationship of the key business functions in the context of product line management allows you to identify those products offering the best combination of volume potential, business fit, and margin contribution, while eliminating underperforming non-strategic products. 1 3 2 ization effort: Here arefourstepstoestablishcross-functional,collaborativeproductlinemanagementandsparkyourrational- FOUR STEPS. the salesandmarketingstrategy. should especiallybe madecleartomanufacturing.Manufacturing mustbeproactivein understanding product portfolio.Establishingthisclaritybeyond thewallsofsalesandmarketingisdesirable, It isimperativeforsalesandmarketingtoarticulateanintegrated strategythat clearlyidentifiesthe GAIN CLARITYONYOURSALES&MARKETINGSTRATEGY assessment ofthestrategicvalueproductlines andSKUs. years), thenapplytheParetoPrincipletoanalyzeprofitabilit y andvolume,lastlyperform aqualitative margin analysis,andstrategicfit.LookfirstattheSKU salesvolumesin thenear history(threetofive Put theSKUs tothetest.Therearethreeproductline attributestotest:volumehistory, volumeand DIVE IN:PERFORMADETAILED PRODUCTLINEANALYSIS al workstream. Planning (S&OP). S&OPisanexcellentproductmanagementtoolthatoftenomittedasorganization- tion mixin amannerthatutilizes theinput ofallstakeholders.ThinkrobustSalesandOperations all toocommon.Organizationsmustbeabletotranslateforecastedrevenuedollarsaviableproduc- planning andschedulingtoderiveaproductionmixwithout collaborationandcross-functionalreview,are Strategies thatstate“sell$X worthofproducts in regionY,”andleaveitathigh levelortothevagariesof UNDERSTAND HOWTHESALES &MARKETINGSTRATEGYISCONVERTED TOUNITS increased operational efficiencies. SKUs, whichresults in reducedcostofgoods sold andinventories and This stepeliminatesunderperforming andnon-strategic productlines and mix byweeding outproductsthatarefilling space, volumein theportfolio. Product line analysissupportsthedevelopmentofanoptimized production Result: produced andsold.Inotherwords,anopportunitytogetitright thefirsttime! develop insights regardingthenumber ofproducts thatcanandshouldbe Facilitated collaborationbetweensales,marketing,andmanufacturingto Result: capabilities andcapacitytooptimallyproduce accordingtoplan. requirements andcustomerneeds,whileopeningthepathwaytoaligning This stepwill enablemanufacturingtoimproveitsunderstanding ofproduct Result:

Effective Product Line Management Page 02 4 capabilities andlegacy knowledge with the proven IPM The IPM leadershipapproach combines itsclients’ internal efficiently, – cost-effectively, andoftenaheadofschedule. goals their sustain and meet clients helps Through careful planning and rigorous execution, IPM Products, Industrial andHealthcareindustries. Consumer Sciences, Life the within management project business consultingcompany specializinginprofessional a is (IPM) Inc. Company, Management Project Integrated Integrated ProjectManagementCompany, Inc. manufacturing efficiencies,increased capacity,andorganizationalsynergies. If your organizationhasn’trecently assessed yourproductportfolio,youcould be missing out on vitalcostssavings, Isoutsourcingaviablealternative? Canweraisethepriceofproduct? Decision Point3: Doestheneworemergingproductneedtimetogrow? Decision Point2: Canweincreasevolumeontheexistingproduct? Canwesubstitueahighermarginproduct? Decision Point1: As youcompletetheproductline analysis,developyourapproachtopruningtheportfolio.Forexample: TAKE ACTION:IMPLEMENTTHERESULTS approach mustbealigned withcommonbusinessgoalsin allfunctional areas. ly mentionedinpoint#2,productline rationalizationcannotbesuccessfulifperformed in silos.The Manufacturing, salesandmarketing,keyoperationsstakeho sustain theproductline managementstrategy. ment. Thisway,theorganizationisreadytomoveforward tosupportand strong, formalsalesandoperationsplanningprocess isanabsoluterequire- and produce.It isworthreiteratingfrompoint#2thatestablishmentofa derived throughcollaborativediscussionofwhatproductswe intend tosell analysis andSKU rationalization.Significant organizationalbenefit canbe Systemic continuousimprovementcanbecatalyzedthroughproductline Result: focused set-upreduction,leaningoutcriticalprocesses, andeliminatingthatlastbitofprocess take advantageofrawmaterialsynergiesandpurchasingeconomies. costs. an eliminatedproduct. Investigate strategiestoimproveproductioncapability–line andequipmentenhancemens, Consider offeringdiscounted optionstopoolsimilarproductsextendorderquantitiesand Identify opportunities tore-priceproductsthatdonot have alternativestolowerproducedunit Determine strategiestooffersubstitutionalternativescustomersthatareusing orhaveused variance byapplying Six Sigma. no Volume History www.ipmcinc.com/services orcall630-789-8600. visit services, IPM's about more learn To NJ. Parsippany, Angeles, Minneapolis/St. Paul, San Francisco, St. Louis, and Los Boston, in offices regional has company the Chicago, in Headquartered projects. 3,500 some across worldwide, Since its inception in 1988, IPM has served over 300 clients to achieveprojectobjectives “fromwithin.” capability toinspirestakeholderengagementandbuy-in Delete theProduct © 2014-2016 Integrated Project Management Company, Inc. Allrights reserved All Products viable sales Was there for Sales volume yes Volume Analysis Volume Volume High High products the All Products All Products sorted by sorted by volume Are the margin same? lders mustbeinittogether.As previous- Volume Volume Low Low Test 1 Test 2 yes no Strategic Fit DP 1 DP 3 DP 2 All lowvolume Will youlosea Is therepotential & margin products product isn’t Is theproduct customer if significant to sustainor offered? emerging? grow inthe new or future? no no no Delete theProduct Retain theProduct yes yes yes

Eﬀective Product Line Management Page 03