The Wall Street Journal reported recently on a new trend in retailing: pruning down the huge number of product variations, or stock-keeping units (SKUs), on the nation’s shelves. Driven by their desire to control more and more of retailers’ shelf space, consumer product companies introduced more than 47,000 new products, package sizes or variations in 2008 alone. Retail chain operators, not to mention customers, have finally cried “Enough!” And market researchers are hearing that shoppers feel overwhelmed and confused by too much to choose from – almost 50,000 items in a typical large supermarket.
We at Leonardo Group Americas don’t profess to be retail experts, but we do see a valuable lesson in this news – valuable to all of us who work to improve the efficiency, effectiveness and flexibility of value streams. Complexity of any kind – of processing steps, inventory to manage, sequencing problems, excess transportation, and long lead times – always drives cost. We would claim that the enormous product proliferation in consumer goods of recent decades, rather than delivering “greater choice and value” to the end customer, actually backfired by confusing that customer, and bloating the cost structure of the entire manufacturing and distribution value stream. No one asked his retailer for 50 different versions of Oreo Cookies!
Two lessons come to mind. First, as a manufacturer or marketer, don’t be so consumed in your own struggles and world view (“We’re going to dominate Target’s shampoo department!”) that you lose touch with the living, breathing customer actually trying to select some shampoo. Work hard and continuously to understand what really constitutes value for that decision-maker at the end of your value stream.
And second, never underestimate the transformative power of re-simplifying a value stream which has become too convoluted or complex. In our consulting work with hundreds of client companies, we have never led a Value-Stream Mapping session that did not result in surprise, astonishment, sometimes embarrassment, and always a drive to action among the participants. “What? We run invoices through all those departments? And it takes four days? Let’s map out how we’ll do it in four hours!”
Unnecessary complexity also makes it very hard for management to see, and know, how things are going. We recently finished a Lean line implementation for a remanufacturer with badly disjointed processes and piles of WIP everywhere. The VP of Operations, whose mezzanine office overlooked the whole facility, exclaimed after the new line was running: “Now I can see everything – units for the day, who’s ahead, and where we need resources!”
Perhaps the best-named book in the Lean literature is Learning to See, the well-illustrated text on Value Stream Mapping by Mike Rother and John Shook. What’s so great about that title? Because learning to see value, processes, and waste is the most valuable skill that you, your colleagues and your employees can gain and put to use. Once you can see where your company’s real value comes from, attaining simplicity comes naturally – and with it, all those Lean benefits of lower cost, better quality, and improved timeliness that retain your loyal customers and attract new ones.
Reference: “Retailers Cut Back on Variety, Once the Spice of Marketing”, by Ilan Brat, Ellen Byron and Ann Zimmerman,The Wall Street Journal, June 26, 2009.