Leaner product portfolios increase profitability
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.