The challenges of variant diversity
Many companies face the challenge of managing an ever-growing number of variants in their product portfolio. The idea of modular products is obvious. However, modular systems often exist only in the minds of designers and sales staff. In IT networks, however, these are not adequately represented in modular data structures or consistently across departmental boundaries.
This results in different views of product diversity, fragmented processes with manual interfaces and data mappings, media disruptions between non-synchronised IT systems and a high susceptibility to errors. These challenges not only cost time and money, but also jeopardise the company’s innovative strength and competitiveness.
In this article, we emphasise the importance of consistent modular structures across the entire value chain. You will also receive specific recommendations on how to achieve exactly that – with a focus on a high level of variant diversity.
The value of variant diversity for the company
Before we go into detail, let’s start with the following question: What does a product variant do for the company?
You often hear adventurous stories about restrictions on the number of variants. Product management only wants the standard if possible, while sales feels restricted in its options. This leads to trench warfare between the departments.
Let’s take a look at the whole thing from the outside: The value of the variant arises from the fact that it provides an additional selling point for the market. However, this value must be in relation to the effort that we as a company have to go to in order to be able to offer and produce the variant. And this much can be said in advance: This has a lot to do with repetition and automation.
It is therefore not a question of having no or as few variants as possible. Variants can be real competitive advantages! But they should run efficiently through the entire value chain. Using, producing and offering variants should be a conscious, controlled decision.
Now we can address the question of why variant diversity actually hurts? Well, there are essentially two reasons:
- Without foresighted and continuous planning, the result is often uncontrolled growth.
- Without administrative preparation, the operational process is often inefficient.
Without foresighted and continuous planning, uncontrolled growth often occurs.
Where are new product variants created? This means: Where is the decision to create a new variant made?
In the worst case, the answer can be: “If the managing director says so, then we’ll do it”. In companies with more structure, the decision can be narrowed down to two main sources:
- In product management. This is where variants are created strategically and proactively by asking questions such as: What does the market need? What can we as a manufacturer do particularly well? Where is the intersection and how can we produce and market these variants?
- In sales. Here, variants are created operationally and reactively through specific customer enquiries, which are responded to with a customised product variant.
The area of tension is obvious. Product management works on Controllers. The aim is to gain as broad a market as possible with as little effort as possible. The focus is on the products, not on individual developments. Sales usually works with the claim: “The more turnover generated, the better”. The question of whether this turnover is actually good for the company is often secondary.
Both places of decision-making should not be played off against each other. Without foresighted and continuous planning, many new products/variants can emerge in both places, leading to the aforementioned challenges.
Old products are often not discontinued. As a result, the product portfolio grows, becomes confusing and diluted. Solid portfolio planning is also made more difficult when new aspects are spontaneously integrated into existing product families. This often happens in the form of a project and at these moments the focus is on solving an individual request. This happens in sales and product management on the basis of a customer request or spontaneous decisions. Without a clear understanding of the product and its range of variants, the result is uncontrolled growth.
Without administrative preparation, the operational process is often inefficient
In this section, I would like to start with the following question: Where does variant diversity usually hurt? At the front of the value chain (i.e. in planning) or further back (i.e. in day-to-day operations)?
I think most companies will now say: At the end of the operational process, of course!
Why is that? Well, the number one cause of pain with variant diversity lies in missing, outdated or simply unsuitable data. In most cases, however, this data is not collected in the same process step in which it is processed, but a few steps earlier.
If you look for optimisations in the process step in which the pain occurs, this usually results in workarounds. These may make life easier in the short term, but they certainly do not provide long-term solutions! In other words: local optimisation only combats the symptoms, not the cause!
The symptoms of pain caused by variant diversity are:
- Fake security
A new variant is quickly offered with the motto “we’ve often done something similar, it can’t be that difficult”. However, it then takes much longer to work it out because this “similarity” is not documented. If a new variant is created in the IT systems, various aspects have to be analysed: Design effort, sales benefits, effects on production, logistics, etc. Somewhere in this chain, the “similar new” has unexpected effects.
- Lengthy throughput times
This is probably the classic. Everything takes longer because compensations are necessary due to missing information, unclear responsibilities, etc. Highly paid employees then go on an often lengthy search for the necessary information. There are unnecessary clarification loops and redundant data collection.
- Media breaks and redundancies in the data
If each department works on its own, isolated solutions are created in the IT systems used. Often even “by design” because, for example, production is not interested in “the gossip from marketing” and the “hard facts” are in the ERP system. Nevertheless, isolated solutions have to be set up redundantly. This results in decelerations in the operational process and additional effort in the administrative process. In addition, the data structures of these islands are difficult or impossible to map to one another. This means that there is no basis for automation.
If you want a smooth operational process when dealing with new product variants, you have to think ahead in the administrative processes!
However, this is often not the case, as the effort required to set up good modular and data structures is quite high. However, it quickly pays off, as investing in administrative processes leads to savings in operational processes if problems are frequently repeated. This becomes all the clearer when we realise how much higher the number of data users is compared to the number of data maintainers. The ratio of designers as data sources to sales staff as data users alone is around 1 to 10 to 20!
How does good planning look like?
Forward-looking and continuous planning works well if you have a clear picture of the desired variant space and actively control it. Above all, this means that everyone involved along the value chain has the same picture! This shared understanding is more important than a defined specification that is passed on from one department to another. Because in that case, not everyone involved will recognise themselves in the picture. A good, common picture also includes a cross-departmental clarification of the questions: What is standard? What is “special”? When the picture is shared, teams don’t contradict each other — they collaborate.
Forward-looking planning
In organisational terms, you have to find the right answer to the given diversity of variants. Small quantities of variants can be pre-stamped in an order-neutral manner. Larger quantities are typically modelled in the modular system, which enables order-specific variants with little effort. In addition, the equivalent value of the variant must also be right. Either the variant itself has a corresponding price, or it is sold in large quantities. Nobody would think of producing a customised variant for a few euros in batch size 1.
The greater the variance, the smaller the batch size often is. This is a recurring theme in special machine construction in particular. In these cases, customised development is a sensible approach. Because where there is no reuse, it is generally not worth investing in modular structures. But even in this case, individuality should not be given free rein. You should be clear about which parts belong to the desired Product portfolio and which do not. For example, when asked whether a customised variant should be created, you can sometimes decide in favour of “no”. For the rest, you should, as far as possible, consider a modular system for at least some of the products/variants. Many special machine manufacturers rely on a 50-80% standard modular system and only the rest is customised on request.
Continuous planning
The second key word in planning is “continuous”. Because one thing is certain: there will be changes in the product portfolio! You can’t foresee everything, and that’s okay. This makes it all the more important to continuously focus on the target image of the desired range of variants and to scrutinise the status quo. Then you have a good basis for controlling variant diversity across departments – strategically planned and operationally implemented along the entire value chain.
CPQ as a core element of the end-to-end value chain
If you don’t offer and manufacture customised products, you can pass on the specifications from product management directly to production and process them there. In the event that customised variants come from sales, we have another station in the value chain. This must also be integrated into the overall process in order to achieve (automated) consistency.
CPQ software (configure-price-quote software) can close this gap very well. It receives the specification from product management in the form of a modular system as input. Each customer-specific enquiry now runs through the rest of the process in a standardised manner within the range of variants specified by the modular system. Customisations and extensions that are not included in the modular system can also be added at this point. In this case, the CPQ software ensures that the extension is passed on together with the standardised part – as a kind of common channel that bundles both for the successor products.
The issue of consistency is the crux of the matter! We want to prevent the specifications and results from having to be translated manually from station to station. It is therefore important that the data structures fit together and can be (automatically) mapped to each other.
- To ensure that product descriptions are interpreted in the same way by everyone, a semantic specification is required. The definition of characteristics is a good solution here: Individual characteristics are predefined with a type and certain metadata, e.g. units or predefined values. Semantic interpretability is ensured by the fact that products, assemblies and parts have certain characteristics and are described with valid values. There are various terms for this, such as characteristic attribute list or classification.
- The individual departments have different information requirements. In sales, for example, the use of a product is of more interest, together with customer-visible functions. In production, specific part numbers, parts lists, work steps, etc. are important. These views all belong in the digital representation of the modular product system! However, they must not be islands, as this prevents automated translation.
In other words, the core of a well thought-out cross-departmental mapping of variant diversity is the digital data model, which is distributed across several IT systems. Those who proactively make the right decisions at this point in the early phases will ensure that variant diversity hurts less.
How does variant diversity affect your business?
Can your company also benefit from forward-looking, continuous planning and targeted administrative preparation?
We will be happy to support you – contact us now!
Head of Consulting, encoway GmbH
LinkedIn
More exciting topics:
