Variant management as control lever: customer-oriented range of products and optimised production In order to be competitive on saturated markets, many manufacturers (OEM) often find only one solution: they expand their range of products with new product variants thus trying to completely exhaust niches. Only few of them, however, have a reasonable variant and complexity management. Therefore, Dr. Klaus Alders and Dr. Andreas Romberg of Staufen AG advocate a fundamental product planning in advance. They say that five percent of the overall product costs – considering the whole lifecycle – can be saved. A great variety of variants boosts costs in all sub-processes of the value-added chain. Thus financial strain increases disproportionately and risks getting out of control. Product variants which are initiated without detailed planning and market surveys may have devastating impacts for OEMs but also particularly for smaller and medium-sized companies in the contract manufacturing sector.
Dr. Klaus Alders and Dr. Andreas Romberg of Staufen AG, both experts on complexity and variant management, describe three steps which are important for a successful variant control. “The central question when setting up a product portfolio must not be ‘what is possible?’ but rather ‘what is our customers’ need?'”, Dr. Alders says. He also points out the fact that the term ‘customer’ refers to the actual end consumer rather than to retailers such as important department store chains. 1. Identifying customer requirements “Realistically seen, products primarily sell if they meet customer requirements, or if the product history appeals to the consumer emotionally. According to customer evaluation, prices are secondary,” Dr. Romberg confirms. The focus of the product portfolio setup should therefore be on the satisfaction of customer requirements as well as on the investigation of alternatives in order to be able to produce and offer appropriate items at a favourable price-performance ratio. A precise analysis of the market situation is indispensible in determining customer requirements. “It is necessary to identify the characteristics which make a product successful,” says Dr. Alders. Experts recommend making variants transparent, e.g. through the ABC tree structure: product characteristics and variants subject to sales figures and fitment rates, respectively. 2. Determination of product design options A central factor of product design is the correct evaluation of how customers perceive ones own articles, since in most cases, the technological characteristics inside the product are only of secondary importance to the customer.
“If the customer has the choice between two cars, and one has a drive shaft which is five centimetres wider than the other, this won’t be decisive for the customer,” Dr. Romberg states an example. Thus it is necessary to distinguish between the variant which the customer can “experience” and the one which he “cannot experience”. Additional value, which is not recognised as such, can be left out – as long as this can be realised from the technical point of view and it also makes sense – thus saving costs. The clear categorisation of ones own products and, if applicable, also competitors’ products with this aspect in mind allows for an easy evaluation of design options. Experts recommend focusing the overview on product characteristics. 3. The decision for product variants The decision on variants should not only be made by isolated, local entities such as purchasing, development or sales which have their own parameters. Decisions must rather be made on an interdisciplinary level considering and evaluating the overall benefit for the company. Finally, software tools can accomplish efficient evaluation of variant scenarios. The decision for or against new product variants should depend on the complexity to be expected and the related cost development because the major goal is a clearly laid out platform of all components which forms the basis for the production of all articles. Dr. Alders states a sample calculation: “In a current car model, the air-conditioning system is connected with a commercial plug consisting of 20 contact pins. In the new model variant, the connection is designed differently, and the plug would only need to have eight pins. Nevertheless, it makes sense to use the larger plug in the future. There are several concrete financial reasons: although the unit price for the smaller pin is cheaper, the volume purchase of the plug with 20 pins makes up for the costs of the development and procurement of new tools for the processing of the smaller plug by far. Furthermore, there won’t be any expenses for the development of further variants in future as it is always the same part which will be fitted. This also prevents reworking costs caused by mistakes.” Apparently minor factors such as stated in this example can result in major savings and increase the product quality at the same time as avoiding mistakes due to a higher degree of complexity. Process description and standardisation If finally individual promising product variants are filtered out, it is necessary to incorporate them in a detailed framework consisting of item quantity and key performance figures because thus they can be compared und profits and costs will be made visible. Products with long lifecycles (>10 years) which require “basic development tasks” rather than adaptation development can be optimised in a single activity using the described approach. For products with shorter lifecycles and series production, Dr Alders and Dr. Romberg however recommend the integration of variant management into the product creation process. In this case, the variant management process should be clearly described and embedded in the product creation landscape. Really successful companies such as Toyota in the automotive sector can be identified by their good variant and complexity management, says Dr. Romberg. Dr. Alders confirms this statement with a sample calculation: “If a company produces 18 variants, each variant can theoretically only make up for one eighteenth of the turnover.” Thus for the reasonable implementation of a huge variety of goods, an according platform in terms of finances and quality is required. The basic advice given by the experts thus is the guiding principle of “less is more”, where the few variants must be best tailored to the requirements of the end customer. These prerequisites, on the other hand, can only be accomplished if there is special commitment during the product development phase, i.e. the product conception phase.
