“General Managers and Portfolio Managers, this article is for YOU.” – Mike Borel, Context Partner
Context conducted a project for a regional business of a global company that identified products and SKUs that were taking more time than they were being charged, and therefore, reducing effort on other products. What did they do? Removed 25% (by number, half that by revenue) of a portfolio! Read on to know the story and the results.
Portfolio distractions cost money, time and opportunity. Let me tell you about a “real life” project we led on this subject. The client was a multi-country region of a major crop protection company with roughly 2000 SKUs which included old and new active ingredients, high margin and mid-range margin, and various formulations and pack sizes. The business was profitable overall and no individual SKUs were losing money – at least they were not losing money based on the accounting done.
Investigating the portfolio for possible distractions was an idea initiated by Context and ultimately driven by the general manager of this region. This manager wanted more time and energy on the newer and higher margin products and commissioned the study/project. The project was decidedly opposed by the Sales Managers and Country Managers – so much so that we talked often during the process about having a target on our front and back (see cartoon).
We dug deep to find out how much sales and other time was actually going to each product or SKU. This resulted in a new financial summary. We then identified ~500 SKUs (including more than a few AIs) that were taking time and distracting the organization from doing everything possible to sell high margin and new products. We proposed some for sale, others simply for abandonment. The sales organization went crazy trying to stop this. The manager powered through (which was key) and made the changes.
What were the results? In the very next season, sales increased and margin/EBITDA increased even more (on only products that were in the portfolio the prior year). Everyone involved, including the sales team enjoyed a better bonus. The opposition went away.
100% (yr 0) – 12.5% (end of yr 0) = 115% (yr 1)
Context has the experience, knowledge, processes and resources to do this job for you. Interested? Contact us to discuss possible portfolio distractions in your business.
Cartoon © Gary Larson available at http://www.flickr.com/photos/gluv/298864264/lightbox/