Effectively managing portfolio product complexity
Portfolio complexity is a pervasive issue across a variety of industries. Although SKU rationalization has been historically used as a remedy, it fails to prevent complexity from creeping back in over time. Our comprehensive portfolio complexity management services offer a sustainable solution that enhances profitability, improves customer satisfaction, and fosters innovation.
SKU proliferation is one of the most widely ignored predicaments of businesses, large and small, across a variety of industries. To a certain extent, it is a side effect of different strategic paths companies take in order to advance their positions, including mergers and acquisitions, micro-targeting, and flexible configurability. However, many companies still lack the attitude and a systematic portfolio management discipline to address portfolio complexity successfully.
The negative impact of portfolio complexity can be substantial, for the organization itself and for business partners along the entire value chain. As demand becomes more fragmented, smaller orders of greater variety create higher levels of complexity that quickly drive up cost, reduce productivity of valuable corporate assets, and drain critical organizational resources.
Traditional SKU rationalization approaches tend to focus on restricting supply by eliminating low-volume, unprofitable SKUs. As a consequence, by acting more on the symptoms rather than properly addressing the causes, SKU rationalization efforts typically fail to produce lasting results, allowing complexity to creep back in over time.
In response to those challenges, we have developed a comprehensive methodology to help companies contain SKU proliferation and manage product portfolio complexity in a more effective manner. Our approach:
- Takes a broader portfolio management view
- Is grounded on in-depth understanding of product profitability (at the SKU and portfolio levels)
- Is driven by customer perceived value and market requirements
It involves monetizing value (where customer value is created) and using demand-shaping techniques to steer demand toward more favorable SKUs, while aligning incentives and promoting structural process and infrastructure changes to ensure that a self-reinforcing mechanism will drive sustainability.
Portfolio complexity is part of our broader portfolio management capabilities.