Complexity management through product portfolio cost modeling and optimization

Abstract

A significant amount of complexity exists within the brand and product portfolios of PharmaCo. This complexity is driven by several factors: first, medical needs for differing products and dosages; second, marketing requests for new configurations of current product offerings; third, unique regulations and requirements for individual country markets; fourth, product portfolio growth from acquisition activity. This complexity increases both production costs and support costs (such as planning and procurement) for PharmaCo. The focus of this project is to reduce the complexity in the brand and SKU portfolios at PharmaCo. Two approaches can be utilized to reduce complexity in the product portfolio. First, measures can be taken to reduce already existing SKUs and brands. This has largely been the focus of previous efforts at PharmaCo, although additional work remains in this area. Previous analyses have focused on providing recommendations for pruning specific SKUs and divesting or pruning specific brands. Second, measures can be taken to manage the future proliferation of SKUs and brands in order to control future complexity growth. This approach has been largely unaddressed in previous internship projects and will be a major focus of the current project. It is first necessary to clearly understand all costs that are associated with complexity. Consequently, the first step of this project was to conduct site visits with multiple plants in order to learn all costs that are impacted by complexity. At these site visits, cross functional groups involved in all aspects of operations at the site were identified and consulted. Additionally, Marketing was contacted to understand complexity costs that affect Marketing. Both cost elements will be combined to develop a complexity cost model. This model is being piloted and applied to a stable brand that still has level or increasing volumes over the next several years.