Be4ward

Product Complexity Management

Many healthcare product companies have broad product portfolios that they are selling in multiple markets. Beyond the US and big five European markets, sales volumes can drop dramatically for individual SKUs. Even within the larger markets, portfolio expansion and specialised products can result in low volumes. These effects result in an explosion of packaging components of ever decreasing volumes, to manage and maintain. This can create a significant overhead cost, often referred to as a ‘hidden factory’ and reduce run times on packaging lines. We have seen healthcare product companies where more than 50% of their SKU portfolio have daily sales volumes of less than 30 packs, yet where packaging batches supply years of stock.

So why does this happen? We suggest four main root causes:

1. Maximising the sales value of the portfolio by creating and launching as many existing product variants, in as many markets, through as many channels as possible
2. The move to higher value, lower volume products, treating more complex conditions with increasingly tailored therapies
3. Legislation and regulation drivers not being harmonised across all the different legislators globally
4. Local requirements and preferences, or necessary requirements to meet the needs of the market and local marketing and historical preferences

Therefore both good and bad complexity exists. The key is to learn how to manage good complexity, that which presents value in terms of financial return from the sale of product and develop methods to control bad complexity.