Product Mix Optimization

It seems that in every manufacturing enterprise the focus - sooner or later - comes to rationalizing the product line. "We have too many SKUs!" Sometimes SKUs are only slightly different, and the more products in a company the more complex accounting, warehousing, and even manufacturing can be. When it is time to assess your product line, we propose the following possibilities:

- Consolidate products with similar characteristics, with a focus on offering the higher value product.

- Subcontracting or otherwise outsourcing production for some small orders to companies that are more suited to small quantities, then increase product pricing such that the product remains profitable. This gives an indication of true market prices and production costs.

- Another way to optimize small-order production products is to set up a dedicated in-house production line that makes nothing other than make small-order products.

- Very selectively take products that have no margin or strategic value, and transferring those products to a competitor - with the cooperation of the customer - to maintain the relationship with the customer.

- Press to develop better forecasts for small-order products, then make large quantities of those products in anticipation of future orders. Since these products are generally small orders, even making a 10x historical quantity, may not have a significant impact on inventory costs or turns. This may not be practical for products with shelf-life or obsolescence concerns.

- Negotiate longer lead times with customers for small-order products so orders can be consolidated, allowing for better production planning.

- Explore faster changeover methods, and train operators to implement them. For all equipment, develop a commissioning and reliability work process.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.