In this blog series I’m looking at the, often very necessary, issues of product packaging complexity and how these can be addressed via appropriate product portfolio, optimising the packaging facility design and examining key attributes of product packaging. In part two, I looked at optimisation of the packaging facility, the impact of packaging design and the consequences of mismanaged complexity. Here in part three, I will be offering some top tips on what to consider to drive maximum value out of your packaging portfolio:
Tip 1: Understand the product/therapy strategy and value of complexity
Is the commercialisation strategy for the product and therapy and the subsequent value of complexity understood?
Different products will have different requirements for the complexity of the packaging componentry and SKU portfolio. This can be driven from many factors, including but not limited to:
• Therapeutic, titration and dosing requirements
• Unmet medical needs
• Legislative requirements of the countries into which the product will be marketed
• Competitor activity and the competitive environment
• Commercialisation strategies for the product
• Market positioning and product cost profile
• Product life-cycle, line extension and patent expiry strategies
• Combination products, starter packs, special usage requirements and other opportunities to drive adherence and assist patients and healthcare providers
• Product protection, temperature and security requirements
• Local dispensing requirements
Prior to undertaking any complexity optimisation activities, it is important to understand and document these requirements to:
a) Ensure they are clearly defined and met
b) Ensure they are maintained as needed
c) Ensure appropriate control can be provided to prevent further non-essential requirements emerging
Tip 2: Understand the portfolio, volumes and life-cycle of SKUs
Is the portfolio, volumes and life-cycles of your SKUs understood?
The next step in a complexity reduction activity is a detailed understanding of the target SKU portfolio. The scope of this may be certain brands, geographic areas, supply chains or perhaps your entire company portfolio. For the chosen portfolio, you will need to understand:
• The description of each SKU – product, dose form, strength, volume.
• Where are they supplied from? Which market(s) are they supplied to? Which distribution lanes are used?
• What is the subsequent component range?
• What are the SKU volumes?
• What is the financial contribution of each SKU?
In addition, it is important to understand where each SKU is on its product life-cycle; are volumes increasing or decreasing? Typically, products go through a standard life-cycle: launch, growth, maturity, and tail off. The value of portfolio complexity often varies through this life-cycle. Therefore, it is important to understand where a product is on its life-cycle as products where the volumes are likely to increase need to be considered differently from tail products where the volumes are declining.
Tip 3: Have clear approval and control processes for portfolio changes
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.
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 life-cycle 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, those contributing most of the revenue, where sales efforts should be focused 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.
Tip 5: Share components or packs
Are you maximising the opportunities to share components or finished packs?
Shared components and packs can provide a great opportunity to increase component and pack volumes. However, to make this happen it is necessary to identify markets and products that can successfully share components or packs. There are a number of criteria that you should consider when looking to group markets for sharing. These include geography, languages, regulatory rules, regulatory approval timelines and sale price. Choosing markets to share products needs to be considered carefully as it requires close collaboration between those markets when changes are being implemented. Therefore, it is better to have consistent groupings of markets rather than vary the sharing groups by different product. Standard market groupings also simplify the ‘where used’ assessment during the change impact assessment. A significant challenge with shared packs comes when there are different approval timelines or locally driven changes. This can result in more than one version of the shared pack being required; effectively driving you back to market specific packs.
In my next post in this series, we will look at some of my top tips for optimising the packaging facility design to deliver optimal service levels at minimum cost.
Should you have any questions about this or any of my other blogs, if you would like to discuss the packaging complexities within your company or would simply like to request a copy of my booklets, please don’t hesitate to contact me directly on my email Andrew.firstname.lastname@example.org