Case studies
Complexity reduction for a high-tech manufacturer
A leading global high-tech manufacturer enjoyed years of healthy growth in the personal computer space, a reputation for reliable products, and a consistent spot as the market-share leader for notebook and desktop products in key global markets.
Challenge
With the success of the direct model, the manufacturer was faced with decreasing market share and increasing margin pressure, especially for their notebook products. In a reactive mode, the notebook division added a direct channel and tried to grow the retail and professional direct account channels with ever increasing platform and SKU proliferation. The company intuitively identified increasing product complexity as a main driver for decreasing margins.
Approach
A.T. Kearney worked with a cross-functional team of engineering, product development, marketing, and component and ODM managers to conduct an initial complexity assessment. The complexity assessment was performed on three levels: platform, build-combination, and component proliferation for notebook products. Key aspects included the following:
- Assessment of the current product complexity, utilizing complexity visualization tools such as "Variant Trees"
- Complexity impact assessment based on historical sales and channel volume data, platform and component usage, warranty analyses, and other cost information
- Selective platform and component complexity comparisons to the best-in-class competitors
Based on the assessment, the team identified opportunities for immediate product complexity reduction, and required process and systemic changes to maintain reduced complexity levels.
Results
The initial assessment revealed a 50% higher platform proliferation than the competition with most revenues and profits derived from only a few platforms. In the direct channel, the company offered a myriad of pre-configured choices that customers did not desire, plus customer and inventory-driven demand management was not in place.
The cross-functional approach provided the notebook division with a shared vision and plan, including:
- Immediate product complexity opportunities – three identified complexity cost drivers, and identified means to reduce component levels for component cost savings
- Systematic, cross-functional complexity decision process to further reduce and maintain component and platform complexity
- Cost-based analytical decision tools to evaluate and determine frequent component changes and platform expansion decisions
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