• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • REGIONS
    • Asia Pacific
    • Canada
    • China
    • Europe
    • Latin America
    • Middle East/Africa
    • North America
  • BLOG
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Product Line Structure and Feature-Value Analysis: Focused Approaches That Improve the Bottom Line

Product Line Structure and Feature-Value Analysis: Focused Approaches That Improve the Bottom Line

01.11.COVER_10.gif
February 10, 2011
SupplyChainBrain

Analyst Insight: Many organizations struggle with how to effectively deliver upon executive-level mandates for retail margin growth.  There are several reasons for this, one of which is the lack of a formalized approach supported by tools that are used to drive a fact-based analysis that identifies the source of cost savings and provides insight to the high-impact improvement efforts required to realize the benefit. Overlay the fact that most organizations pursue cost reductions through functional approaches, as well as the lack of recognition that sustainable and incremental margin improvements require ongoing use of the approach and tools, and the result can be sub-optimized and often competing efforts to deliver upon the mandate.

-Michael Rellihan, associate principal at REL, a division of The Hackett Group

For consumer product companies, especially those manufacturing highly engineered products across multiple product categories, decisions made regarding product line positioning and featuring can have a significant impact on bottom line performance. Products that are poorly positioned in the marketplace, or contain costly features that consumers don't value, can result in both loss of market share and reduced margin.

Product line structure and feature-value analysis are two components of a broader, comprehensive framework supported by quantitative and qualitative tools that are designed to deliver specific cost-saving actions. Product line structure and feature-value, in particular, are approaches that result in the identification of opportunities to optimize the product range, maximize volume and margin, rationalize unprofitable SKUs, reduce products' net landed cost by de-featuring, and drive up price points through up-featuring.  Each of the approaches utilizes a defined set of tools that are applied after some high-level analysis has been performed to identify and prioritize those business platforms that then serve as the focus and "scope" for the more detailed analysis.

The product line structure approach deploys tools such as SKU profitability and complexity analysis and channel and sales allowance analysis to identify products/brands that have overall profitability issues, whether those issues are driven by product-specific attributes versus channel-specific attributes, as well as identify opportunities for SKU-level and brand-level consolidation. The result of the analysis is a target set of products to do a deeper profitability dive to determine their core issues, and the basis from which to develop specific cost saving improvement actions. Typical savings generated from improvement actions linked to product line structure analysis are in the range of a 1-percent to 2-percent increase in gross margin.

The feature-value approach deploys tools such as competitive feature assessments and cost benchmarking, bill of material analysis, and other market/survey and internal costing tools to identify opportunities to better target customer market segments with features deemed to have high value relative to cost, as well as to identify areas of potential savings by product, part and sub-system. Typical savings generated from improvement actions linked to feature-value analysis are in the range of 2 percent to 5 percent of material costs and an increase in gross margin of 1 percent to 2 percent.

The Outlook

Many organizations don't have the cross-functional structure and the framework and tools in place to drive the ongoing focus on cost that's required to support margin growth. Transitioning from a functionally-driven approach to cost reduction to an approach driven by cross-functional commitment supported by robust tools and approaches that are embedded into the organization requires executive-level leadership and commitment, as well as a pilot business platform from which to launch the tool set on a limited basis.

The outcome will not only serve as a basis for identifying where opportunities exist to reduce cost and what the potential value of those opportunities are, but it will also establish a scalable and re-usable framework for future analysis and broader improvement efforts.

RELATED CONTENT

RELATED VIDEOS

Technology Business Strategy Alignment Quality & Metrics Global Supply Chain Management Retail
KEYWORDS Business Strategy Alignment Global Supply Chain Management Quality & Metrics Retail Supply Chain Analysis & Consulting Technology
  • Related Articles

    Companies See That Better Management of Their Suppliers Benefits the Bottom Line, Study Finds

    Optimizing DC Labor to Drive Workforce Productivity & the Bottom Line

    How Enabling Supply Chain Visibility Can Improve the Bottom Line

  • Related Events

    Why IBP May Save Your Supply Chain & How to Run It By This Spring

SupplyChainBrain

100 Great Supply Chain Partners Issue 2009

More from this author

Get regular updates!
Subscribe to our newsletter

Enjoy curated articles directly to your inbox.

Popular Stories

  • 1115_chinarareearthminerals

    Podcast | Can China’s Monopoly on Rare Earth Minerals Be Broken?

    Sourcing/Procurement/SRM
  • 1107_intelusedsupplychain

    Intel Used Its Supply Chain to Reshape Company Culture — and Make Millions

    Technology
  • 1111_makeorbreakblockchain

    The Element That Can Make or Break Blockchain for the Supply Chain

    Technology
  • 1125_themodernfactory

    The ‘Modern’ Factory Remains a Dream for Many Manufacturers

    Technology
  • 1118_howconsumerproductscompanies

    How Consumer-Products Companies Are Wasting Their Digital Spend

    Technology

Digital Edition

55746

Subscribe today and receive the latest issue

Start Your Subscription

Case Studies

  • Manufacturer Slashes Shipping Costs With AI Packaging Solution

  • Apparel Retailer Saves $45 Million With Reverse Logistics Solution

  • QuestaWeb Configures Fragrance Company’s Complex Procedures Into Its Advanced FTZ Software

  • Business Turnaround: Integrated Business Planning as a Management Tool

  • How a 3PL Reduced Rejected Deliveries Using LoadProof

Visit Our Sponsors

  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • Webinars
  • The Magazine
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • 100 Great Partners Form
  • Resources
    • Newsletters
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us

All content copyright © 2016 - 2018 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing