In my last post I looked at how to reduce product variants, and the inevitable conflict with sales. In this post I will look at how to reduce not the number of final products, but the number of part types that go into the final product… and here you often have a conflict with product development. However, like the reduction of the number of final products, this reduction in fluctuation has significant benefits for the company.
Cost of Complexity
How to Reduce Product Variants
Product variants drive up cost. The more variants you have for the same quantity sold, the higher your production cost. Inversely, if you can reduce your number of variants, you can reduce your cost. In this post I will give you some general suggestions on how to reduce your number of variants. Hopefully these inspire and help you to become more efficient.
The Benefits of Mass Production
Mass production makes items faster, better, and cheaper. The larger your production volume, the lower your cost and, subsequently, your product prices. This is common knowledge, but what is not well known is the magnitude of this effect. In this post I would like to show you a few comparable products, albeit with vastly different production volumes, and hence different prices.
Cost of Complexity
The cost of complexity can significantly impact the bottom line of manufacturing companies. According to A. T. Kearney, the top 30 companies in Germany could earn €30 billion more if they would reduce complexity, increasing their EBIT by three to five percentage points. After discussing the cost of complexity in a previous post, using the Maybach as an example, this post describes the general levers influencing complexity cost.
A Lean Obituary for Maybach – A Cautionary Tale About Cost of Complexity
With the end of last year, Daimler stopped selling its flagship vehicle, Maybach. I would like to use this opportunity to talk about the danger and harm to your company by increasing the number of product types sold. As an illustrative (and expensive) example, I would like to split the total cost of the Maybach in its individual parts (as far as I can estimate them). My hope is that this motivates you to reduce, or at least no longer increase, the number of variants in your product portfolio.