By Ron Ketterling – President
As we discussed in part 1 of our series on product line rationalization, a huge benefit of rationalization is the increase in profit. That fact alone is enough for companies to consider rationalization in their cost reducing strategies; however, the additional benefits make product line rationalization a better operational strategy all around.
• Improved Operational Flexibility: Low-profit products typically require unusual parts, materials, set-ups and processes. Many older, low-profit products are built so infrequently that the workforce does not have the experience necessary to quickly produce a high quality product. High-profit products that use more common parts can be manufactured quickly, without the obstacles that generally come with the low-profit products.
• Simplifies Supply Chain Management: The elimination of products with unusual parts, materials and procedures greatly simplifies supply chain management.
• Availability of Resources: Rationalization frees up valuable resources to improve operations and the quality of products, introduce new methodologies (such as build-to-order and mass customization), and implement better product development processes and procedures.
• Improves Quality of Products: Older products are typically built infrequently by inexperienced staff, resulting in quality issues. In contrast, higher profit products are evaluated more frequently to improve their quality.
Product line rationalization goes further to improve your overall product line. By concentrating on higher profit products, manufacturing companies will increase their profit significantly over time. Keeping current and re-evaluating processes and products is crucial to any manufacturing company’s success. An ERP system can help you achieve this. Download our whitepaper, To ERP or Not to ERP: It Isn’t Even a Question, to learn how the right ERP system can help you reduce your inventory levels by 22% and improve your complete and on-time shipments by 10%.