Improving Automobile Product Offerings and Inventory Management
Making the complex more simple
The company needed to identify profitable opportunities and improve high inventory levels and slow-moving products. Deloitte helped identify potential cost savings worth several million dollars, while reducing orderable configurations by 66 percent. The North America division ended 2007 with a 4.5 percent volume increase over 2006.
The company had difficulty managing its complex product offering, due to the vast number of options and feature combinations available for most products. Also, the company did not understand the benefits and costs of that broad offering. A lack of integrated financial data, inadequate competitor and market knowledge, divisions operating in silos, and minimal understanding of what truly mattered to the customer and what products sold well/quickly and which did not (sales velocity) all combined to hinder the company’s ability to develop a market-driven product portfolio. Specific issues included:
Deloitte was asked to help the client with their efforts to quantify the costs and benefits of their complex product line-up based on a market/customer-oriented view and to derive an orderable configuration strategy that increased sales and marketing profit on an ongoing basis for its vehicles in the United States. With Deloitte’s assistance, the company:
After uncovering a competitor strategy that uses a regionalized product offering, the team determined that the same strategy would allow the client to better address the specific needs of each region while drastically reducing complexity by region. The team identified potential cost savings of several million dollars while reducing orderable configurations by 66 percent. In addition, a framework developed to manage complexity allowed the client to quantify relative values of different orderable configurations, improve sales velocity and lower inventory levels.