Every year, manufacturing companies struggle with the same challenge: planning sales volumes and prices at the same time as production volumes and costs. It’s a chicken-and-the-egg issue between the Marketing and Product Management teams handling the customer side, and the Engineering and Cost Management teams, working on the product side.

When searching for a solution online, one might come to the conclusion that software is the end-all-be-all solution. The truth of the matter is: the value is in the process.

How A Global Toy Company increased visibility and iteration cycles

We recently worked with a toy manufacturer based in Europe. Their Marketing, Product Management, Design, Engineering, and Cost Management departments work together to define the specific product lines and offerings in time for Christmas. From March to August, they define which products will be manufactured and which won’t; what the sales prices will be in various countries and for each box set; and what margins will be made for each set and total overall.

By experience, the key to success in this scenario is not just meeting the targets, but the number of iteration cycles between all the players. Alta Via helped this global company setup two distinct planning loops that facilitate the communication through a custom application.

On the Portfolio Loop, Marketing and Product Management focus on a high-level definition of the product’s functions and features. The Portfolio Team is responsible for the selection of the “best” products for the portfolio based on agreed KPIs. The underlying planning application is used to simulate contribution margins using drivers like sales prices and volumes in order to meet financial targets. One of the critical steps is the definition of Cost Targets for each product.

portfolio planning

 

On the Product Loop, Engineering and Cost Management focus on individual product functions and features. The Product Team is responsible for developing the “best” solution to meet their technical and cost targets. The underlying product costing application is used to estimate production costs using drivers like material quantities and purchase prices, routings, packaging sizes, number of page and quality of documentation, etc. They must also align with operational KPIs like fill rate because … who wants a large box containing only a handful of famous bricks? Setting up this portfolio/product planning process reduced the duration of their iteration cycles from months to weeks, and even down to a few days in critical phases of the portfolio development.

Author: Julien Delvat