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Product Rationalization

By actdbi | April 13, 2022

Creating value for an Agri business with our product rationalization and analytics solution

CASE: Product Rationalization for a Leading AgriFarm

(Product visibility across business drivers, drill-down analytics, measurable insights, and action plans)

Introduction

ActDBI engaged with a leading AgriFarm to support them rethink critical aspects of their product portfolio to gain more profits and be sustainable while increasing their farm produce. The key highlights of the solution are:

Improved business metrics by eliminating underperforming SKUs.
Out-of-box rationalization solution providing quick visibility and actionable results.

The Story of AgriFarm

A leading Agrifarm in India has approximately 10 acres of land which grows various fruits, vegetables, and bi-products. The firm produces ~46 product variety and sells to various channels such as key customer accounts like Reliance, D-Mart, other distributors and retailers, e-commerce, and cash-and-carry, generating on average INR 20 million annually.

The business realized new growth but was unable to anticipate improved profitability. Revenue was spread across multiple SKUs and pack sizes. They experienced massive expansion of product portfolio, whilst it produced only a few units for a single customer. Cashflow suffered and managing multiple SKUs increased complexities. Our business decided to get insights into its business metrics, its product trends and seek opportunities to regain profitability.

They wanted an easy, fast, aligned solution for meeting its objectives and at a reasonable price. Our client approached ActDBI to get support with its out-of-the-box product rationalization solution which provided actionable driver-based insights and recommendations.

The Challenges and Need

The business sought growth and profitability in its farm product sales across its customer channels over years. Instead, it saw increase in its product spending and cost-to-serve had also increased.

There was increase in multiple SKUs and pack sizes, and the business was unable to identify which SKUs & brands made money. They had difficulty choosing optimal number of products, planning for new products to meet revenue targets, and meeting requirements of growing customer & channel demand. Before choosing ActDBI’s solution, business was looking at only volume sales and order bookings made by their reps, while ignoring value sales across same product SKUs. Business had difficulty with massive data and with quickly analyzing the product trends and KPIs for getting profitability insights.

ActDBI’s Product Rationalization Solution

The business needed balance between its optimal SKUs with pack size variants and its variety of products to produce/sell, in order to stay competitive across all channels. ActDBI provided robust data and process harmonisation strategy, and an analytics approach to meet its product portfolio management challenges.

ActDBI provided an easy, fast visualisation, cost-effective solution that fit firm’s business process and provided actionable results.

Specific feature highlights offered with the solution:

Easy template for data uploads
Actionable driver-based visibility & analytics
Industry-leading product rationalisation best practice KPIs/OKRs/metrics incorporated into offering
Clear and quick product insights & results
Action plan for recommended cost and profitability improvement options provided

Solution Offering

ActDBI product rationalization and analytics solution:

KNOW: Effective visualisation of the product-demand mix trends across 3 years data with volume, sales value, cost of goods sold, and gross/net profit
ANALYSE: 80-20 Pareto analysis for volumes & sales value, ABC- XYZ product/SKU categorisation using volumes, sales value, gross/net profit, Gross/net margin return on Inventory (GMROI/NMROI) analysis per product
PLAN: Profitability and growth of underperforming products using scenario plans to merge/milk/kill variants
ACT: Options to rationalise value-cost and underperforming products
OPTIMISE & IMPROVE: Enabled AI/ML to analyse real-time data and identify patterns, trends, and the right products for each channel served using Tableau forecasting.

The Results

ActDBI solution provided a new approach to see profitability at a product-demand level and measuring the overall business in terms of its GMROI/NMROI. This helped our client align its business value proposition better and free up its inventory investments for high growth products & SKUs.

Results included:

5% reduction in working capital (inventory) within 12 months
SKU portfolio reduction by 15% and simplified SKU-demand mix
Increased annual net profit by 9%
Better growth forecasting due to less volatile demand

The following graphs show the product visibility by volume & value, Pareto analysis by volume, and share of products/recommendations by ABC-XYZ analysis.

To know more on about ActDBI solutions.

Visit: https://www.actdbi.com/planning-as-a-service-2/

Write to us: contactus@actdbi.com

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