A-brand and PL food producer, with a large network of factories in Europe. Active in the Benelux for food retail and food service customers.
A growing variety of customer specifications and the need for further differentiation resulted in an increase of operational complexity. This had an impact on the indirect costs and bottom-line. As these indirect costs were disproportionately allocated across individual SKUs, competitiveness of core ranges became under increasing pressure.
Our assignment was to objectify complexity in order to facilitate better decisions based on the actual cost of SKUs.
Our team exposed the most important complexity factors within the end-to-end process. Weighting factors were determined based on the level of impact on indirect costs, so that a complexity number could be determined for each SKU.
This complexity figure has been the input for a so-called 9-box analysis, which identified significant portfolio issues. In addition, a complexity framework has been developed for structural assessment of complexity in strategic portfolio choices and better allocation of indirect costs.
Based on our work this client has obtained a clear picture of which SKUs add significant complexity and therefore disproportionate indirect costs, so specific follow up actions could be determined. The new complexity framework provides guidance for a balanced allocation of indirect costs and smarter portfolio decisions.