“Your product portfolio is too big!”
“Yes, I know …!”
“Time to stop the madness!”

Just a few months ago, before the world of disruption had really taken off, it was still claimed that the markets demand more products, more flexible and short-term planning, as well as higher customer service.

Well, it seems that the big party is now over for once! Inflation and thus interest rates have risen, consumers are paying more attention to their spending and industry is confronted with sometimes considerably thinner order books. Inventories and cash flow are getting much more attention again.

The planning world remains complex and a constant challenge for companies, if only because of the many disruptions. Customer service also remains important, but should be viewed in a differentiated way. For which products do customers need a very high delivery service and for which is a lower one sufficient? We have written several posts on this subject under Supply Chain Clustering.

BUT: Now it’s time to tackle the topic of product portfolio optimisation! Just about every company supposedly does this all the time, but unfortunately far too half-heartedly. We at TenglerConsulting simulate the effects on inventories and then our clients’ eyes get very big. Because there is no bigger complexity (cost) driver along the entire supply chain than the product portfolio. From product development, to sales, purchasing, order taking, production, logistics, accounting, after sales…. practically all areas are involved. Actually, it is a mystery why companies drag “poor dogs” through the entire value chain and produce unnecessary costs, as shown in the BCG matrix as early as 1970.

And ask yourself as a consumer whether your behaviour with regard to product variants has not already changed? Anyone who thinks just a little bit about sustainability should take this topic seriously!

Source:
[1]: BCG 1970. The Product Portfolio. [Accessed: 10 November 2024].