You may have run a product cleanup before. Somebody pulled sales by part, a list of slow movers and thin accounts went around, a few were dropped or repriced and the margin looked better for a quarter or two. Then new part numbers arrived, a good customer asked for a special, quoting said yes and before long the list looked the way it did before the cleanup.
Two things usually went wrong: the cuts were made one item at a time, and nothing was put in place to keep the answer current once the cleanup was over.
One item at a time misses the cost
If you just go through your product list, eliminating an item here, an item there, you will almost certainly fail to achieve a transformational commercial impact.
The cost of a long tail of small items is spread across the setups, the tooling, the inventory, the schedule breaks and the attention they take together. Drop one item and those costs barely move. The machine still changes over for the next small order, the scheduler still works around it and the tooling still sits on the shelf. You lose that item’s revenue and keep most of its cost. The same AlixPartners piece warns that you “might even make things worse by cutting revenue but not reducing organizational complexity.”
The decision that moves cost is made at the level of a part family or a customer: which families and which accounts earn their place on the schedule, judged on the hours they use on the machine or line that limits your output (your constraint). A decision at that level changes how the schedule is built, and that is where the cost sits.
The list grows back
Tail-cutting can create short-term benefits but chopping in one place generally doesn't stop complexity from regrowing elsewhere.
New part numbers arrive every week through quotes, engineering changes and customer specials. Old ones leave only when someone decides they should. A cleanup handles the second half once and leaves the first half running.
Size makes this harder. In a single plant run by its founder, the owner can order a cleanup and see it done. Add plants and a layer of management between the owner and the floor, and the order still gets carried out, for a while. Keeping it going takes a routine that runs whether or not the owner is in the room.
Why it slips when everyone agrees
The first reason is that the day’s work wins. A late order, a machine down and a customer on the phone each come with a deadline, and a review of the product mix does not. Nelson Repenning and John Sterman of MIT wrote that most organizations “reward last-minute problem solving over the learning, training, and improvement activities that prevent such crises in the first place.” A mix review is that kind of work.
The second is that acting on the answer takes a decision somebody has to own.
Technology can expose complexity. It cannot substitute for the courage required to stop work, retire a product or eliminate a favored project.
A report can show that an account loses money. A person with authority still has to decide whether to reprice it, move its work off the constraint or end it, then explain the decision to the salesperson who brought it in.
What to do instead
Replace the cleanup with a routine small enough to survive a busy month.
- One read, every month. Revenue and gross profit by customer and by part family, with the hours each takes on your constraint, run from the same extract every time so the months compare.
- Written rules for what each result means. Which work gets priority, which gets repriced and which new quotes need a second look. Decide the rules once, so the monthly meeting applies them instead of arguing them again.
- One named owner. A person on your team runs the read and takes the exceptions to the people who can act on them, with a date for each decision.
- A screen on new work. New parts and new accounts are checked against the same rules before they are quoted. That is the part that keeps the list from growing back.
The read does not need perfect cost data on day one. Start with revenue and constraint hours, which no overhead rate distorts, and cost the top of the list properly as you go.
A Margin Discipline Blueprint builds the first three steps with your finance team: the extract and the cadence for the read, the written rules and a named owner to run it. It ends when your team has run it on a real cycle without us.
Where to start
The Growth Check takes about fifteen minutes, and one of its questions asks which products make up two-thirds of your gross profit. If you have run an 80/20 before and it did not stick, say so in the open questions. What you tried and what happened tell us more than the numbers alone. We read every response ourselves and reply by the next business day with what stood out.