Stagnating markets, high material prices and shrinking margins pose major challenges for companies. Carefully executed product range streamlining can restore their profitability.
Declining profitability due to difficult market situation
Rising material costs and ever-increasing price pressure confronted a manufacturer of electrical products with the difficult question of how the company was to remain profitable. The outsourcing of production for the simpler products to cheaper foreign countries had already been planned, but due to the worsening market situation it soon became clear that the production of the complex products would also have to be outsourced.
Extensive analyses and careful planning of measures
In a first step, the interim manager entrusted with the project analyzed the entire product portfolio for production costs and net prices actually achieved. He then analyzed for each product whether it could be replaced by cheaper, equivalent third-party products or whether costs could be optimized through redesign. The level of investment required for this, as well as the cost and duration of any re-certifications, also had to be taken into account. The subsequent profitability calculations showed where even better solutions had to be sought.
After management had approved the proposed streamlining of the product range, the interim manager planned it in detail. In doing so, he had to take into account mutual dependencies: The construction and commissioning of the new site had to be coordinated with the shutdown of the old site, and know-how had to be documented and passed on. At the same time, the sales staff prepared and communicated price increases and the discontinuation of individual products and, if necessary, worked out new solutions with customers. The entire process was, of course, closely supported by the HR department.
With the reduced portfolio, the company is now back on a profitable footing. In order to ensure market success in the long term, development of new products has now begun.
Interdisciplinary teams take account of mutual dependencies
A decisive factor in the success of the product range streamlining was that both the product analyses and the (detailed) planning of the resulting measures were carried out by interdisciplinary teams. This meant that all interdependencies could be taken into account at an early stage.
Also very important was the involvement of the sales department and customers, on the one hand, so that other solutions could be sought at an early stage, particularly in the event of product discontinuations, and on the other hand, the constant open communication with employees.
Product range adjustments are sometimes unavoidable cuts in order to keep companies profitable in the long term. Interim managers from Top Fifty know the challenges involved. We quickly and easily provide you with experts who are familiar with your industry and have proven themselves as project managers.
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