P055| THE VIRTUOUS CIRCLE

In this crisis environment most of business are concentrated on killing cost, with no discrimination. Is that wise?

Most of times when businesses are not performing the expected top-down plan, as planned, they immediately look back to supply areas are main generators of this situation. For sure supply areas (understood as anything upstream the sale event) can contribute more, ALWAYS!

However businesses are missing some points. Let me come back again to my recurrent demand subject. Businesses must look after their portfolio and particularly the product life cycle.

Some pathology is common across industries but some of them have not clue about how to tackle the problem. Symptomatology speaking when the private lave floods our P&L accounts it’s typically because the product category usually is mature. Some industries can protect them with technical barriers (constant product renovation -no innovation-; ads -making unaffordable for eventual competitors; regulatory compliances…)

Portfolio should be reinvigorated to have the next lunch ahead the “cow” product reaches maturity to ensure a continuous sustain of products on maturity level. From introductory to mature stages are when gross margin should be bigger, specifically if our company is contributing innovation (no renovation).

If as consequence of a portfolio analysis we realise our portfolio is too mature and some newer products are on the way, my advice would be to start considering to outsource these “low value contributors” to free up space for newer incoming skus, which we will need all our efforts to be able to squeeze the maximum level of gross margin (lot of initiatives cutting down costs).

That would shape the “industry’s virtuous circle” (why circle?…).