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 maximize 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.
This is the fourth of a series of 20 blogs giving a view of methods to deal with packaging complexity. Please help me improve the thinking by adding your comments and share this with others who may have a view.