Stock Keeping unit (SKU) and packaging component portfolio control is a critical activity for organisations. Ensuring the correct balance between a commercially advantageous portfolio, whilst minimising unnecessary pack and component variants is a challenge faced by many healthcare product companies as they grow their product range and expand into new markets. Therefore ensuring there are decision making processes in the organisation to manage required levels of complexity is a key aspect of effective pack management.
In this blog series I will describe key features of a complexity management capability in an easy to digest format. I hope you find this information useful. We are always searching for ways to improve our work, so if you have any feedback, please do not hesitate to contact me at Andrew.Love@be4ward.com.
Packaging Complexity Management Tip 3: Clear approval and control processes for portfolio changest
Do you have clear approval and control procedures for adding and removing SKUs from your portfolio?
Firstly, do you have the appropriate cross-functional governance to ensure that all relevant impacted parties are engaged in the decision making and represented appropriately at a senior level? Failure to have a balanced governance will likely result in sub-optimal decisions and low levels of buy-in.
Secondly, do you have a clear set of principles endorsed by the senior governance team to manage the portfolio? These define the ‘rules of the game’ and set the criteria that decisions should be made against.
Thirdly, do you have rules and processes in place for adding or deleting SKUs and components. These processes need to ensure that the decision making hierarchy aligns with the complexity of change occurring. Processes should also include routine reviews of the portfolio (see Tip 4).
Finally do your processes ensure that the costs for change are considered in decision making and preferably charged to the groups in the organisation driving those changes, for example charging the cost of artwork change to the originator?
Packaging Complexity Management Tip 4: Prune the portfolio regularly
Is there a regular process to review the portfolio and prune unnecessary or non-performing SKUs?
The performance of the portfolio is dynamic, changing due to many environmental and lifecycle factors. Therefore a review process should ideally be performed on a routine and repeating basis to maximise the effectiveness of the portfolio. The review should be designed to categorise the portfolio. One way we would suggest is these three groupings:
Capitalise: the best performing SKUs, contributing the majority of revenue, where sales effort should be focussed to maximise return.
Control: SKUs that should be maintained in the portfolio, either because; volumes are growing, but not yet providing revenue to get to the next category; volumes are in decline, but not yet critical; or they provide portfolio support to other Capitalise SKUs. These SKUs should be monitored to ensure on-going viability.
Challenge: SKUs with low volumes and/or low revenue. These SKUs should be subject to challenge to remain on the portfolio, either being discontinued, substituted or shared with other markets.
Two things to consider carefully:
- When substituting SKUs, ensure the financial benefit exceeds any potential lost sales.
- Small incremental reductions in the portfolio can have little effect on complexity at supplying sites. Savings are often only generated when lines or facilities are rationalised or eliminated.
Packaging Complexity Management Tip 5: Control brand variation
Do you have a process to control the brand image and prevent unnecessary or undesirable proliferation of brand designs?
It is not uncommon for companies to have a range of brand images that have arisen historically:
- Locally generated brand names and brand images.
- Response to local market regulations requiring unique local naming or branding.
- Legacy brand images from acquired companies who once marketed the product in a specific country.
- 2nd brands or co-marketed products.
If standard brand images and packaging artwork designs can be maintained, it presents the opportunity to take a template approach to artwork, improving efficiency and reducing risk or error. This is discussed further in Tip 7.
Many companies now exercise strict control over brand images and packaging designs at a global or regional level, to ensure they present a common identity to consumers.
It is extremely difficult to rationalise brand images after the event due to regulatory constraint and consumer resistance and therefore clearly defined and mandated brand guidelines are an important tool in controlling brand variation up front.
This is the second of a series of 7 blogs giving a view of methods to deal with packaging complexity. Should you have any questions about this or any of my other blogs, or would simply like to request a copy of my booklets, please don’t hesitate to contact me directly on my email.