10 Product Portfolio-Altering Steps for Supply Chain Success
This is a guest article by logistics content writer Kristie Wright
There are many ways to streamline your eCommerce, travel, or healthcare business’s supply chain processes. One of the most effective is to periodically reshape and revive your product portfolio. Implementing smart portfolio management protocols is the key to helping your business grow under any market conditions, be they favorable or challenging.
Your supply chain is a crucial part of your business’s day-to-day operations. It creates, moves, and sells the products that generate the bulk of your income. It stands to reason that if your supply chain lacks efficiency or scalability, your business simply cannot operate at its highest level.
Redefining and critically assessing your supply chain and product portfolio from several angles can help improve your bottom line. When you examine your company processes with an open mind, you can redesign them in a way that enhances your system’s overall output and performance.
Here’s how to reshape your product portfolio and optimize your supply chain in 10 simple, actionable steps.
1. Determine the Strategic Value of Every Product You Offer
The purpose of your supply chain is to move the product you sell from your manufacturing department to your sales department. If certain products are not bringing in a profit or any tangible benefits for your business, it’s probably time to remove them from your portfolio. Or adjust them in a way that enhances their strategic value.
This process involves considering what each product you offer really does for your company. If an item lacks profitability or cannot support your brand, your course of action should be to change this by removing or rebranding the inferior, nonperforming product.
Sometimes, products have simply reached the end of their life cycle and are outdated. They’ve remained in your inventory because they were top sellers and, although they’ve slid down the ranks, they’re included simply due to their former reputation. You need to be ruthless when examining the strategic value of every product, even if it was last year’s top seller.
As consumer demands change, so too should your inventory and your supply chain. Products with no value or rapidly decreasing value can end up costing you money rather than bringing it in. Compile a list of all of the products your business offers and get rid of any items that no longer perform at their peak. You can easily add exciting new products to keep your product portfolio size consistent. A good rule of thumb is to onboard one new product for every nonperforming one you remove.
2. Assess Each Product’s Profit Cycle
Every product in your portfolio must do its part to generate a profit for your business. Once you have a selection of products in line with your brand’s vision, it’s time to look at their earning power.
Start this analysis process by looking at your gross profit and the cost of each product in your portfolio vs its sale price. Also consider the net profit margins associated with your portfolio after expenses. Carefully check the pricing of each product to ensure that it’s capable of earning you the profits you need to thrive.
If a product is a top seller but brings in minimal profit, it can work out. But if it’s a low profit, low sales item, it’s not likely to be worthwhile.
Here are 3 steps to accurately assess a product’s profitability.
- Calculate its true cost of production, including the costs of materials, labor, access to equipment and resources, utilities, salaries. and any other costs associated with the manufacturing process.
- Test your market by consulting with customers, clients, friends, family members, and business partners. Gauge your competition’s prices of similar or identical products and see how yours compare.
- Find the happy medium. Set your product’s price somewhere between the point you’ll successfully recuperate its production costs and the high cost point that most of your customers will reject. Prepare to be flexible with these prices, and to regularly assess your competitors’ pricing strategies. This way, you can adjust yours accordingly to remain competitive.
3. Examine Your Entire Supply Chain
If you want to keep your operational costs low, examine how your products move along your supply chain from start to finish. Keep a close eye out for any problems or bottlenecks that cause snafues, along with any unnecessary or redundant steps that elongate the process, and keep customers waiting.
The longer your products take to arrive at sales, the more your profit margins will be negatively impacted. To ensure sustainable supply chain management, consider changing over to a portfolio-based approach rather than one centered on SKU (Stock Keeping Unit). This allows for a more granular, targeted approach that makes supply change management and refinement easier.
You also should align your management protocols with your pricing process so you can price new product entries appropriately. Any changes in your inventory and supply chain can call for adjusted pricing, and this is an integral part of driving profits. Failure to price new or updated products correctly can lead to a loss in revenue. Consult your accountant or financial manager to collaborate on how best to price your new products.
Here are the steps to follow to determine a fair and sustainable price.
- Calculate the overhead costs of running your business. Include the costs of labor, marketing, manufacturing, rent, debt service, office supplies, and salaries where applicable.
- Determine a “success point” at which your business will start to become profitable. Add that figure to your expenses to find how much income sales must generate.
- Identify your customer base’s demands and desires. Will they buy your product and how much will they realistically be willing to spend on it? How many of these items are you likely to sell, bearing your current resources in mind? How many of them do you need to sell to meet your success point? All of these considerations should be borne in mind during your pricing process.
- Monitor your profit margins and pricing regularly. Assess the costs and profits of each product you sell so you know exactly how much each one contributes to your monthly bottom lines. Speak to your customers — if they love your products but find certain ones overpriced, consider modifying those prices in a way that maintains their profitability but makes them more appealing to buyers.
- Raise your prices slowly and incrementally. Slow increases can give the impression that your product is worth the price, but rapid price hikes can make you seem desperate. Watch your sales volumes directly after price changes. If you see any negative changes, you may need to do more to sell your price-increased product to justify its higher cost.
4. Bear Quality and Service in Mind
For a business to become successful, it needs to sell products that offer real value and quality to its customers. A simple way to gauge the performance of each of your products in this regard is to check out the reviews that your customer service department deals with.
In today’s digital age, 84 percent of people trust online reviews as much as personal recommendations, and they can impact as much as 67.7 percent of purchasing decisions. These stats clearly highlight how reviews can affect sales and why using them as a litmus test for product retention is recommended.
If certain products yield more negative reviews than positive ones, it might be time to replace them with better quality items that more effectively meet your consumers’ demands. Take note of any products that consistently garner complaints or tepid reviews. Then, speak to the reviewers to find out how you can improve or replace those products to better meet their expectations. Once you add new and improved products to your portfolio, be sure to let those customers know and to thank them for their honest input.
5. Improve Your Business’s Transparency
Improving the transparency within your supply chain helps to keep your business running smoothly while winning the respect and trust of your customers and vendors too. It also allows you to monitor your system’s efficiency more easily, ensuring its optimal operation.
One thing that’s worth mentioning here is the value of concise competitive data. Even when managing your own chain, having access to comprehensive competitive data gives you the upper hand during negotiations with your suppliers, which allows you to maximize profits and stay ahead of industry trends and changes. The more data you have available to analyze, the better you can target your product portfolio and optimize your supply chain.
You can create more transparency in your supply chain by:
- identifying and prioritizing risks to your production chain’s stability. Many businesses use the Failure Modes and Effects Analysis scoring system to do this.
- creating a visual chart of product flow volume that clearly shows information gaps and other important vulnerabilities.
- closing information gaps by gaining feedback from your suppliers, employees, customers, and other third parties. You can also use real-time monitoring tools to gain sufficient information on how your business operates behind the scenes.
- managing your insights and adjusting your supply chain. Experts recommend using a Corrective Action Plan (CAP) to develop effective and creative solutions to any problems within your supply chain.
6. Line Up Internal Systems with Your Supply Chain
Your supply chain is the core of your company and every process you have in place should contribute towards the smooth running of that chain. That goes for interactions with customers, buying and manufacturing strategies, and the marketing messages you use to attract new prospects. Cloud-based EDI supply chain management tools like Liaison Alloy, TrueCommerce, and Amosoft can help.
When these systems are all lined up with your supply chain, your business will operate more effectively in every sense. This way, your sales staff will have knowledge of your stock levels, your logistics employees will know which items are being marketed by your sales team, and so on. By maintaining every link in the chain, the stock and sales process will be consistent from start to finish.
7. Give Your Suppliers Supply Chain Access
Though usually unnecessary to grant suppliers and business partners full access to your supply chain systems, giving them partial access can help them keep their own operations more efficient while aligning them with your needs at the same time.
Alternatively, keep them updated as often as possible so they can revise information within their own systems and stay ahead of the game. This will also foster trust and build on the relationship you have, always a plus in any business.
8. Use Technology to Your Advantage
Mobile technology is here to make your business’s daily processes easier to manage. It can significantly streamline workflow, allow your staff to better keep track of essential processes, and make simple but menial tasks quicker to complete.
Manage your everyday tasks like checklists, data entry, and supply chain management on your smartphone, tablet and laptop, either partially or completely. Doing so could save you hours of precious time, as long as the correct software and tools are in place. Use modern tech to save you time and allow you to position your workforce behind the aspects of your business that need the most attention. Check out apps designed for supply chain professionals and business owners like Logistimo Plus, Mobile SCM, and Scandit.
9. Streamline Data
Proper integration of your internal systems requires you to reduce data duplicates wherever you can. Manual input of data between systems can steal hours from your workforce’s schedules, forcing them to divert their attention away from more important tasks.
Integrating your systems effectively will optimize efficiency, while significantly reducing your staff’s workload. While on this topic, it’s a good time to mention the importance of data backups. Whatever data you store—whether in the cloud or on internal servers—must be backed up securely to increase redundancy and reduce downtime. Many businesses use Google Drive as an affordable and reliable option for cloud-based backups, but there are plenty of other independent options to try as well.
10. Prioritize Scalability
A business that’s not scalable can only grow so much, and generally, increased growth equals increased profits. From the inception of any venture, a business plan should outline the potential for growth, and the steps taken to facilitate expansion. This document is your roadmap to success and, as the supply chain is an integral part of operations, it should be covered in depth.
To expand your operations consistently and exponentially, you need a flexible supply chain that’s capable of handling larger orders, more demand, and bigger figures. If your supply chain isn’t designed to scale up as your business grows, consider redesigning it in a way that allows it to grow with your brand in the future.
You can ensure the scalability of your business by:
- building a highly skilled and knowledgeable workforce. Your employees should be willing and eager to grow with your business, and you can facilitate this growth by regularly upskilling them with courses, workshops, and educational conferences.
- investing in advanced technology and tools to simplify complex workflows and tasks.
- automating business processes like invoicing and data capture that could otherwise take up valuable time and resources.
- standardizing your process workflows by determining best practices for each one. This will help you to maintain consistency, eliminate quality variability, save money, and better keep your customers satisfied.
- identifying and building on your business’s competitive edge. If your workforce is better at sales than it is at supply chain management, you can use this proficiency to your advantage by migrating your core business focus to sales and customer support. This will help your business to grow using its available resources and ensure sustainable scalability.
In a Nutshell
Reshaping your product portfolio is essential to maintaining your business’s profitability and efficiency.
Any products that don’t work as hard as they should for your brand should be replaced by items that can garner better demand, increased customer loyalty, and higher profit margins.
Kristie Wright is an experienced freelance writer who covers topics on supply chain logistics, finance and management, mostly catering to small businesses and sole proprietors. When she’s not typing away at her keyboard, Kristie enjoys roasting her own coffee and is an avid tabletop gamer.
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