For most companies, cutting a product portfolio from 6 000 items to less than
2 200 over a short time frame would be a painful – and ultimately unprofitable – exercise. For WSS, that exact exercise proved very challenging. But the effort reduced revenues by just 0,7 %, proving the key factor right. And the job is not over yet.
The key factor: the transformation was aimed at removing unproductive items, which in turn cut down unnecessary work and allowed for increased focus on providing better service for customers.
“A lot of the 6 000 items were not really active products,” says Danny Ingemann, business director of marine products. “Often they were things that had been there for years and years. The first part was a very easy cleanup: we went in and took out the products that were no longer active. The next part was more challenging. Based on product revenue and the number of orders, we identified products, mainly spare parts but also products that can be sold by themselves, that had very little turnover.”
The driver of the transformation process, he says, is working with products that actually provide value for the company and the customer. “We had products that took up a lot of processes and procedures, so we were actually focusing on the wrong things.”
As Ingemann explains, the buildup of products was in a sense natural, as product managers want to be ready for any customer request. “It’s not always easy for them,” he says. “Product managers will say ‘No, no, no, this is a very important product! We need to have this.’ They can be very attached to their portfolio,” he laughs, “which they should be!”
To adress this, communications were very important. “When you take a product out, even if it’s rarely in demand, you must communicate this well with the network. If we removed a spare part, but we didn’t inform anyone, people in the network would say, ‘What do we do now? It was here before, and now it’s gone!’ So we tell them which products are going to be taken out – we learned about this the hard way! The people involved do get a say – but they don’t get their way every time! If sales are strong enough and there is a global potential, then maybe we will reconsider.”
At the same time, explains Kjell André Engen, vice president of marine products, neither product managers nor customers have been completely left out when it comes to discontinued products. “We have three Procurement Sourcing teams with ten people each, who are sourcing products that we cannot supply anymore,” he says. “So if customers need something that we no longer supply, we have a backup solution.” The desks, located in Rotterdam, Singapore and Houston, help WSS to remain competitive, Engen explains, “and lets us source things that the customers really need.”
While the major reduction is completed, Ingemann stresses that this is an ongoing process, at twice-annual meetings of the product managers, but even on a daily basis. “We just took out another 250 to 300 products,” he says. “By eliminating the unnecessary, the management team can work on strategic initiatives and think about what our customers need. Our service network can then work with these solutions, not deal with too many products that are just sitting there, but really focus on providing service.”