Why is the topic of variant and complexity management more relevant today than ever?

July 29, 2021 | General, Podcast

The constant increase in product diversity is forcing many companies to face up to the issue of variant and complexity management. In order to survive in competition in the long term, the existing product and process complexity must be reduced. We discuss how this can be achieved with Dino Munk, partner at Staufen AG.

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Mr. Munk, why is the topic of variant and complexity management more relevant today than ever?

In many customer support projects we have noticed quite a bit of uncontrolled growth in the product range of companies over the years. This also has to do with the fact that, over the years, they have increasingly followed the individual needs of their customers. Many of our clients operate in saturated markets. To differentiate themselves from their competitors, many companies have adapted to the personal wishes of their customers. This has resulted in a complex product portfolio. Most of our clients are aware of this. They know that their product range should be thinned out and other paths should be taken in product development. But how can optimal customer variance be achieved while at the same time keeping internal complexity to a minimum and optimizing costs? How can you satisfy the individual requirements and wishes of your customers and keep internal complexity under control?

What do we at Staufen mean by variant and complexity management?

There is a multitude of terms and articles on the subject of complexity and variant management from institutes and those active in science, which deal with the theoretical side of this subject. For us, three influencing variables are particularly relevant in variant and complexity management. These are the three big factors that characterize complexity for us: First, change, an influencing variable that primarily affects companies from the outside and with which a company must learn to deal. The other influencing factors are diversity and networking. They have developed within the company and are therefore easier for company managers to influence.

Are there any common principles or approaches for dealing with the challenging topic of variant and complexity management in a controlled manner?

To deal with this topic comprehensively, a consistent focus on the value stream is needed. This is because all relevant functions and affiliated areas must be included when establishing efficient variant management.

It is about choosing the right portfolio of solutions. Most companies do not have an awareness problem but rather an implementation problem. This is because it requires taking time to focus on standardization possibilities. In other words, where can we reduce the range of components, where can we tidy things up and yet still provide the same customer benefits? At the same time, we focus on modularization and building block strategies. How can we best define self-contained modules within the product spectrum that we can adequately combine to create an attractive range of products?

Many companies benefit from the advantages of a clear modularization and building block strategy and thus achieve extreme cost reductions.

Our approach as a lean consultancy is to make companies as lean as possible. This means appropriately taking account of downstream consequences as early as the development stage. In other words, the question of which design leads to efficient and lean processing in the subsequent processes must be addressed. We refer to this as a design-to-lean approach, which takes all areas of the supply chain into account, starting in the product development stage. The scenario begins with procurement and ends in aftersales.

Moving from theory to practice: As already mentioned, many companies have a greater problem with implementation than knowledge. What do you specifically recommend to companies?

From a consultant’s point of view, it is always advisable to take a self-critical look at your own company. Some essential questions you should ask include: How do we develop our product portfolio and how are portfolio decisions made? What common key figures do we use to make these decisions?

Also, I recommend taking a close look at your own product development or design to determine how the requirements of the market are translated into the company’s understanding of them. In other words, check whether the demands from customers can also be appropriately translated, i.e. in a lean and efficient manner. We often find that development bypasses the customer, overengineering takes place and products become too complex and too expensive.

Many companies lack the necessary transparency to be able to provide information about potentials in their variant management that have not yet been exploited, because they lack concrete figures, data and facts. How can companies recognize what can be optimized when it comes to variant management?

Well, first of all, through customer feedback. As a company do we get enough feedback on whether our products meet customer expectations or whether they are too expensive or overengineered? Is the functionality in the product needed and also valued by the customer? What lessons were learned or, quite simply, do lost-quota or lost-order analyses give us clues here?

Another issue that allows conclusions to be drawn about the portfolio is the so-called supply hit rate. That is, the ratio of bids submitted to orders received. Are there any trends that show where we are no longer attractive enough? What approaches are there to counteract this?

Another important factor that provides information about an optimized product portfolio is customer order processing. Does it run like clockwork? Is it efficient? Or are there still high procedural costs here? Are there any signs that we are spending a disproportionate amount of time and effort to service customer orders?

Last but not least, you should also take a closer look at the cost structure. What are the costs of the variant decisions we have made? Do we only look at material and individual items, or do we also look at capital expenditures and one-off development expenses that are supposedly necessary?

In summary, if you take a critical look at the issues of portfolio, product, value chain and evaluation systems, you will uncover a range of starting points that can be used to bring about tangible improvements.

Mr. Munk, why is the topic of variant and complexity management more relevant today than ever?

In many customer support projects we have noticed quite a bit of uncontrolled growth in the product range of companies over the years. This also has to do with the fact that, over the years, they have increasingly followed the individual needs of their customers. Many of our clients operate in saturated markets. To differentiate themselves from their competitors, many companies have adapted to the personal wishes of their customers. This has resulted in a complex product portfolio. Most of our clients are aware of this. They know that their product range should be thinned out and other paths should be taken in product development. But how can optimal customer variance be achieved while at the same time keeping internal complexity to a minimum and optimizing costs? How can you satisfy the individual requirements and wishes of your customers and keep internal complexity under control?

What do we at Staufen mean by variant and complexity management?

There is a multitude of terms and articles on the subject of complexity and variant management from institutes and those active in science, which deal with the theoretical side of this subject. For us, three influencing variables are particularly relevant in variant and complexity management. These are the three big factors that characterize complexity for us: First, change, an influencing variable that primarily affects companies from the outside and with which a company must learn to deal. The other influencing factors are diversity and networking. They have developed within the company and are therefore easier for company managers to influence.

Are there any common principles or approaches for dealing with the challenging topic of variant and complexity management in a controlled manner?

To deal with this topic comprehensively, a consistent focus on the value stream is needed. This is because all relevant functions and affiliated areas must be included when establishing efficient variant management.

It is about choosing the right portfolio of solutions. Most companies do not have an awareness problem but rather an implementation problem. This is because it requires taking time to focus on standardization possibilities. In other words, where can we reduce the range of components, where can we tidy things up and yet still provide the same customer benefits? At the same time, we focus on modularization and building block strategies. How can we best define self-contained modules within the product spectrum that we can adequately combine to create an attractive range of products?

Many companies benefit from the advantages of a clear modularization and building block strategy and thus achieve extreme cost reductions.

Our approach as a lean consultancy is to make companies as lean as possible. This means appropriately taking account of downstream consequences as early as the development stage. In other words, the question of which design leads to efficient and lean processing in the subsequent processes must be addressed. We refer to this as a design-to-lean approach, which takes all areas of the supply chain into account, starting in the product development stage. The scenario begins with procurement and ends in aftersales.

Moving from theory to practice: As already mentioned, many companies have a greater problem with implementation than knowledge. What do you specifically recommend to companies?

From a consultant’s point of view, it is always advisable to take a self-critical look at your own company. Some essential questions you should ask include: How do we develop our product portfolio and how are portfolio decisions made? What common key figures do we use to make these decisions?

Also, I recommend taking a close look at your own product development or design to determine how the requirements of the market are translated into the company’s understanding of them. In other words, check whether the demands from customers can also be appropriately translated, i.e. in a lean and efficient manner. We often find that development bypasses the customer, overengineering takes place and products become too complex and too expensive.

Many companies lack the necessary transparency to be able to provide information about potentials in their variant management that have not yet been exploited, because they lack concrete figures, data and facts. How can companies recognize what can be optimized when it comes to variant management?

Well, first of all, through customer feedback. As a company do we get enough feedback on whether our products meet customer expectations or whether they are too expensive or overengineered? Is the functionality in the product needed and also valued by the customer? What lessons were learned or, quite simply, do lost-quota or lost-order analyses give us clues here?

Another issue that allows conclusions to be drawn about the portfolio is the so-called supply hit rate. That is, the ratio of bids submitted to orders received. Are there any trends that show where we are no longer attractive enough? What approaches are there to counteract this?

Another important factor that provides information about an optimized product portfolio is customer order processing. Does it run like clockwork? Is it efficient? Or are there still high procedural costs here? Are there any signs that we are spending a disproportionate amount of time and effort to service customer orders?

Last but not least, you should also take a closer look at the cost structure. What are the costs of the variant decisions we have made? Do we only look at material and individual items, or do we also look at capital expenditures and one-off development expenses that are supposedly necessary?

In summary, if you take a critical look at the issues of portfolio, product, value chain and evaluation systems, you will uncover a range of starting points that can be used to bring about tangible improvements.

Host

Dr. Thilo Greshake, Partner Automotive, STAUFEN.AG

With a doctorate in mechanical engineering and more than 15 years of international consulting experience in lean development, engineering excellence and quality management, Dr. Thilo Greshake has been responsible for the Automotive division at Staufen AG since 2017.

Guest

Dino Munk, Partner, STAUFEN.AG

Dino Munk studied industrial engineering and has been a permanent fixture in the consulting business of Staufen AG for 20 years. As a senior partner, he leads the Holistic Transformation business unit.

Relevant content

Whitepaper “Variant And Complexity Management”

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