Rationalization is a powerful technique to improve profits, free valuable resources, and simplify operations and supply chains. This process is particularly useful to those companies managing multiple product or service lines.
Synergetics will work with your management team to identify such portfolio opportunities in an evidential and fact-based manner and then facilitate implementation on a value basis. As one of Synergetics’ product line offerings where we specialize, Portfolio Rationalization is how we examine an organization’s portfolio of products to identify best practices and rationalization targets. By aligning rationalization targets with strategy, your organization can realize increases in efficiency and overall cost savings.
Some of the most successful CEOs realize that to grow their company, they must periodically prune their product portfolio. Under your company management team’s lead, we do a thorough analysis to help your business make informed decisions when it comes to eliminating or outsourcing products and product variations that are problem prone, don’t “fit” into a flexible environment, have excessive overhead demands, have limited future potential, or may really be losing money. All companies experience some Pareto effect, typically with 80% of profits or sales coming from the best 20% of the products. Portfolio Rationalization encourages companies to focus on their best products, which in turn allows resources that were being wasted on the low-leverage products to then be focused on growing the “cash cows.”
Most agree that Portfolio Rationalization is a good idea, but when it comes down to it, organizations often find reasons not to pull the trigger. Internal review processes are often difficult when reviewing various portfolios because of personal attachments, biases, “sacred cows”, etc. It is often to your benefit to have an independent review done of products to take bias out of the process. Our expertise has helped similar companies sift through their catalog of legacy products, develop decision tools to evaluate and organize the product set(s), and define new processes for launching new, growing existing, and retiring old products.
Rationalizing the product portfolio is a management process that requires a level of rigor in gathering and analyzing data, defining performance measurements, identifying product underperformance, determining how to improve performance, and eliminating underperforming SKUs. We also look at gross margin return on investment (GMROI) as another marker, for instance. All companies need to have a defined process to maintain their product portfolios, and Synergetics can help you meet, and monitor, your process objectives.