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Why fewer choices can provide higher profits

How many variations of products or services does your company offer?  A few?  A dozen?  A hundred? More?  Are all of these products really required to meet customer demand?  Does it make sense to provide all these choices to your customers?

choiceMany companies have embarked on a journey of product proliferation.  In an effort to capture more market share, we have seen an explosion of customization and niche marketing.  A trip to your local grocery or large retail store confirms this. For example, 352 distinct types of toothpaste were sold in 2010. There are entire aisles dedicated to cereal, dog food, and toilet paper. Have these companies enjoyed increased profits by offering all these new products?  Not necessarily…

In this post, we will briefly discuss the implications of having too many products (choices) on both (1) revenue and (2) costs.

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Eight sources of waste – Lean efforts to reduce the “waste of processing” can drive cost productivity

One of the primary tenets of Lean is the concept of value added activities. These can be defined as actions which transform raw materials and information into products and services which the customer is willing to pay for.  Anything that does not add value can be considered “waste”.  These are activities which consume time, space, or other resources, but don’t contribute to making value.

Classic Sources of Waste

Lean practitioners are familiar with the eight sources of waste.  They form the basis for lean thinking and are often used to offer a framework for removing waste (and cost) from any process.

  • Defects
  • Overproduction
  • Waiting
  • Non-Utilized Talent
  • Transportation
  • Inventory
  • Motion
  • Extra Processing
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When identifying continuous improvement opportunities, small defects can be a big deal to your customers

Anyone who travels often has a story to tell about an unpleasant experience with air travel.  Many of these stories revolve around weather, cancelled flights, rude passengers, sitting on a runway, etc.  I want to share a set of personal observations that prompted me to think about the perception of quality.

Actually, this particular day started out as quite routine.  The check-in, security, and boarding processes were uneventful – just the way you would like them to be!  I took my seat and soon the flight attendant was giving the usual announcements.  You know the drill…

“place your smaller items under your seats…you must be willing and able to aid the flight attendants in case of an emergency if you are in the exit row…laptops cannot be placed in your seatback pocket…”

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