Most companies can make more profits by simply reducing complexity

Most companies can make more profits by simply reducing complexity

Product and Customer Rationalisation.  A Practical Guide on ‘How to’ and the pitfalls.

Introduction

McPherson’s Housewares is an Australian listed public company with annual worldwide sales of 120 million dollars.  Major brands such as Wiltshire, Richardson Sheffield, Laser, Regent Sheffield and manufacturing plants in Hong Kong, Sheffield in the UK and Melbourne, McPherson’s is one of the world’s largest knife manufacturers for the consumer market.  In Australia, McPherson’s business is broken up into seven distinct product groups that includes brand leadership in garden cutting tools, silver and stainless steel cutlery, the Australian icon, Wiltshire ‘Staysharp’ knife and other knife products, the equally well known barbeque product the ‘Bar-B-Mate’ and various scissors, silver plated hollowware and silver photo frames.

In 1994 we realized that while our business was growing we were unable to control inventory and always had too much of the products we couldn’t sell and not enough of the product we wanted.  Our customer service was poor and McPherson’s was considered to be one of the worst suppliers in the industry.  Our accountants kept telling anybody that wanted to listen that stock turns were terrible (less than two turns per year on our major product group) and we needed to fundamentally change the way we did business.  I can remember a discussion with our accountant “You’ve got too many products, too much inventory”.  The reply “Consumers need a range, cut my range and the sales will fall.  Keep your nose in the figures and let me worry about the important things like getting the sales and growing the business”.  Sounds familiar doesn’t it.

(more…)