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Leaner product portfolios increase profitability


December 9, 2009
by PLANT STAFF

TORONTO: In today’s economic climate, Canadian manufacturers are constantly searching for new and innovative ways to cut costs. While a product portfolio is typically the last thing companies want to trim, a new white paper by Grant Thornton LLP suggests such a cost-saving measure can simultaneously improve a company’s bottom line and foster growth.

If 80% of your profits are coming from 20% of your offerings, it’s time to trim down, according to Survival of the fittest: Uncovering the benefits of product rationalization.

The report explains how a sound product rationalization strategy will enable manufacturers to identify and eliminate unprofitable product lines, and potentially increase the profitability of remaining lines.

The secret is to focus on a company’s strengths and ensure all product lines are in synch with a company’s overall business and marketing goals. Products that don’t fit into the overall business plan are likely eating up profits. A specific line, for example, may require exclusive machinery or additional marketing resources that aren’t justified by the final sales numbers.

Products that are ideal candidates for elimination typically consume a lot of warehouse space, complicate the production schedule and potentially use a specific type of machinery that isn’t required by any other SKU.

Click here for a copy of the white paper.
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