ILOS assesses the impacts of portfolio reduction at a large consumer goods company.
A large consumer goods company faced recurring challenges in managing its product portfolio. Throughout the annual business planning cycles, only a very small portion of the portfolio ended up being discontinued, due to commercial areas' apprehension about the potential impacts of more significant cuts. This scenario generated inefficiencies in the supply chain, which had to deal with the operational complexity of an increasingly broad and varied portfolio.
To support decision-making, ILOS developed an analytical model and a calculation tool to estimate the supply chain impacts of different portfolio rationalization scenarios, considering effects throughout the production and distribution chain.
The methodology was structured based on a model of the expected impacts and validated with the company's technical team. It was then applied in a pilot region to evaluate the effects of different portfolio reduction scenarios, as well as to structure a process for replicating the approach in other regions of the company.
The results showed that, even in a more aggressive scenario of reducing less profitable products by up to 30%, the new portfolio could generate significant improvements in operations, including reduced logistics costs, fewer stockouts, improved OTIF (on time in full) indicators, and increased profitability.
project type
- Product portfolio optimization
Segment
- Consumer goods
Streamlining 30% of the company's least profitable portfolio reduces costs, stockouts, and improves OTIF (On-Time In-Full).
Challenge
A consumer goods company was looking to reduce the operational complexity generated by an increasingly broad portfolio and a low product discontinuation rate.
ILOS solution
ILOS developed a tool to estimate the supply chain impacts of different portfolio reduction scenarios, applied in a pilot region and structured for replication in other areas of the company.
- Analysis of the estimated tax benefits with the new CD
- Definition of areas to be served by the eventual distribution center in Minas Gerais.
- Sizing the necessary capacities in each scenario.
Results
Even in a scenario of cutting up to 30% of the least profitable products, the new streamlined portfolio delivered increased profitability for the company and significant improvements in service levels through reduced stockouts and gains in OTIF (On-Time In-Full).
- ILOS conducted realistic estimates of the tax benefits that could be captured, identifying that these gains were below the client's expectations.
- Recommendation not to open a new distribution center in Minas Gerais.
