Portfolio Complexity Reduction
Stop your complexity costs from outpacing revenues.
Keeping portfolio complexity under control
Complexity Management offers companies the tools and insights to take informed and deliberate action. Strategic action that will minimize complexity costs and optimize the product portfolio across the entire value chain.
In 2019, the CPC Challenge Complexity Survey showed that Complexity Management had become a strategic priority in nearly 8 out of 10 companies. But even while 72% of companies were actively working to reduce their complexity, 92% of companies still saw increases.
Most companies are highly professional in introducing new products. Still, only a few of them have the proper framework in place for systematic out-phasing. The result is growing product programs that only become more complex and costly to manage.
At CPC, we believe that it’s impossible to reduce costs we cannot see. For this reason, we have developed a method to make the cost of complexity transparent. And just as important, we pair this method with a rigorous process for removing those costs, leading the company to increased profitability.
There are two ways we often start the journey of Portfolio Complexity Managamant. Either with a sharp focus on cost reduction or product portfolio optimization.
The quickest way to harvest cost reductions is to focus directly on complexity cost factors within procurement and production. By categorizing components and products in ABC categories, we apply powerful comparative analyses to identify the underlying complexity.
The analysis reveals a number of complexity mitigation levers that you can apply to lower your costs. The immediate effects are usually between 0,4-1,5% of EBIT.
The thorough way to reduce complexity cost is by way of analyzing the entire product portfolio. The CPC benchmark shows that 43-65% of products usually contribute to the last 5% of margins and revenues.
Combined with an intelligent allocation of complexity costs, our method exposes the underlying complexity cost drivers – and their solutions. The combined effects usually range between 2-5% of EBIT.