Achieving and sustaining an optimal product portfolio in the healthcare industry through SKU rationalization, complexity costing, and dashboards

Abstract

After years of new product launches, and entry into emerging markets, Company X, a healthcare company, has seen its product portfolio proliferate and bring costly complexity into its operations. Today, Company X seeks to achieve and sustain an optimal product offering that meets their customers' needs. Through a six-month research effort, we develop a process for stock-keeping-unit (SKU) rationalization to reduce SKU complexity while maintaining sales volumes. We, also, implement operational models to compute complexity costs associated with SKU complexity and employ SKU portfolio dashboards to monitor SKU development and govern SKU creation. This thesis discusses a process for applying these tools to any healthcare company. Through two case studies, we apply the rationalization process on one pilot brand and develop a dashboard to improve product portfolio management. We expect that the SKU rationalization process will release 38% of avoidable costs associated with the pilot brand. These case studies also provide insight into how to correctly diagnose the cost reduction opportunity associated with SKU complexity, as well as methods for a step-change improvement in lead-times and cost-reduction. Lastly, removal of complexity provides flexibility to capture other business opportunities.