Tag: metrics

When the tide goes out, it exposes products that were under water

The number of companies with complexity reduction initiatives has skyrocketed. Unlike five years ago, these are serious initiatives with management sponsorship and timelines.

A good friend of mine, who is a salesperson at a Caterpillar dealership, told me that when times are good he can sell any machine. When the times are bad, the bad stuff just sits around exposed.

Companies have proliferated their product offerings  – there are almost infinite variations of everything that they offer. The rationale is that they will make one more sale because of that variation. But as product variations grow, the cost structure grows very fast as well, and the probability of finding that one customer who wants the new variation is quite slim. This results in excess inventory across the supply chain. And when the economic tide goes out, it exposes the cost of those product variations.

The companies with complexity reduction initiatives recognize that during good times and bad, managing product variants makes good business sense. Companies are now starting to implement metrics to measure product complexity because we all know that what gets measured gets managed! Product complexity metrics quickly expose underwater products.

The comment by my friend at Caterpillar reminded me of a trip I took to the Bay of Fundy. It is amazing how much is exposed when the tide really goes out, just like in this economy. The good news is that when the tide turns, the bad product lines it once covered will be significantly fewer, resulting in healthier and more competitive companies.