Simplifying a company’s product and service portfolio has been a core capability of Wilson Perumal & Company for more than 10 years. The benefits of doing so can be significant, with EBITDA lift of 25% not uncommon—and additional advantages such as greater go-to-market clarity and portfolio focus to increase sales. But a key consideration is always how to execute this while retaining revenue—as the portfolio becomes more focused, how best to migrate customers from products on the chopping block to those being retained. It's not a product’s revenue and cost that matter most, but the incremental revenue and incremental cost that the product adds to your business. This is why it is critical to understand substitutability, and why WP&C has developed a number of unique approaches for quantifying the potential for substitutability. The ideal outcome: keep the revenue, and cut the costs.
Our projects below began with a 5-week focused diagnostic to identify and quantify the levers for portfolio transformation and value creation, followed by the execution of these initiatives with the client over the subsequent 2–3 months.
PROJECT 1: Reduced the product portfolio by over 30% to unlock more than a 10% gain in profitability while reducing working capital requirements by nearly 20%
A consumer-packaged foods company saw its profitability erode while at the same time found it harder to realize top-line growth. We looked at 20+ brands and 2500+ SKUs that had crept into the portfolio over the years. By developing a new, statistically-based view of product performance, we were able to identify and demonstrate redundancy within categories. We developed a path to simplify the offering—maintain revenue, improve promotional effectiveness, free up retail shelf-space, relieve assets (e.g., equipment, space, inventory), and improve profitability through increased revenue density. Read the case study here.
PROJECT 2: Unlocked 2x EBIT growth, 15% inventory reduction, and new capacity for a growing market by focusing on revenue and technical substitutability
A global manufacturer of industrial equipment and tooling wanted to capitalize on a market upturn but found it difficult to meet availability and lead-times with its manufacturing capacity and working-capital constraints. We worked with Engineering to understand technical substitutes on an array of product attributes to rationalize a key category by over 60% with no expected loss of revenue and a cleaner transition to a new and improved product line. Read the case study here.
PROJECT 3: Delivered a 45% SKU reduction and a 25% inventory reduction, which led to improved operational performance without impacting revenue, by identifying technical replacements for customer-specified products
A global paint and coatings maker could not meet customer service levels due to manufacturing facilities overwhelmed with product variety and warehouses burdened with an exploding number of raw materials. We identified SKU candidates for removal based on production and raw material requirements, then worked with the R&D team to identify technical substitutes and the associated testing required to meet customer specifications. With these actions underway, a phased SKU reduction plan eased operational issues while maintaining revenue levels. Read the case study here.