Our consulting services include encoway variant management. We identify suitable variants for the respective market and optimise them for the manufacturing company.
There are many established methods in variant management, but none that solves all problems. This is simply because the challenges vary according to industry, company size and product portfolio. Practice has shown that certain tasks in variant management are always given.
Our approach to variant management
We distinguish between three types of activities that together ensure effective variant management:
1. Clean up - getting rid of unnecessary variance
Cleaning up variants is one of the classics of variant management. Companies often have more variants than makes economic sense.
The key question is: How much variance makes sense? Which variants are unnecessary? To answer these questions, the market needs and the economic sense of the variants must be analysed. While the economic sense can be determined from internal data, the analysis of market needs requires external data.
Only those variants that meet both market needs and economic viability form a sustainable product portfolio.
Find out why it is important to consider both.
Economic viability analysis
A profitability analysis is based on hard facts such as order data from the ERP system and answers the question WHAT the customer bought. However, a pure focus on profitability ignores whether the variants are relevant to the target market and can lead to obsolete products.
Market needs analysis
An analysis of market needs is based on external knowledge, ideally already known in product management, and answers the question WHY a customer chooses the product. A pure consideration of market needs ignores whether the variants are lucrative for the manufacturer and can lead to losses.
A good compromise is the analysis of the quotation data from a CPQ system, if it is built there with the help of a customer problem-oriented sales view (compare “Guided Selling” in the next step).
2. Focus - avoid non-sensible variance in the long term
A one-time clean-up does not lead to sustainable success. To avoid unnecessary variants in the long term, product management and sales need to control both planned and requested variances.
This is because costs are already incurred when a variant is created in the IT system, including manual creation of material masters, creation of routings, maintenance of supplier relationships and storage locations for components. It makes more economic sense to avoid unnecessary variants in the first place.
A suitable solution for this is Guided Selling, which focuses the product search on the right product for a given customer problem. Beforehand, it is defined which variants belong to the standard scope. Then the product search can be guided accordingly. This method makes the number of product variants more manageable; new variants are only created if the standard is not sufficient. At the same time, the evaluation of necessary and unnecessary variants is simplified.
3. Organise - make meaningful variance profitable
After removing unnecessary variance and preventing the creation of non-sensible variance, only sensible variance remains. This is the part of the product portfolio that brings the most value to the business.
Balancing external and internal variance through modularisation
External variance is the variety of products a company presents to the outside world. Internal variance is the efficient design of product variants in internal processes.
To optimise the relationship between internal and external variance, a modularisation strategy is recommended in which recurring parts of the variants are defined in a construction kit and combined by a set of rules. Configuration can be used to efficiently assemble new variants and minimise the manual effort required to create them in IT systems.
What we offer
encoway Consulting supports you in the challenges of variant management – in cleaning up, in focusing and in organising.