A recognized toy division of a large sporting goods manufacturing congolmerate had a product line that was widely sold It was a line up of traditional products where the margins had deteriorated and the profitability was not as high as desired.
Find a way to improve the profitability of the company.
Explore options within the existing product lines.
Explore new products and/or product lines.
Explore doing contract work or supplying parts to other industries based on our core competencies.
What was done ?
Initial efforts included exploring the possibility of using existing equipment to do contract work or to supply parts to other industries. After much digging with little results, we shifted our concentration to exploring options within the existing product lines and looking for extensions and/or new products that could be successfully added to the program.
The existing, mature product line had developed over a number of years and there was no rhyme or reason to the parts being used. It became apparent that there was a tremendous opportunity to replace the huge variety of common parts (nuts, bolts, bearings, packaging, etc.) This was done and at the same time the replacement parts program was completely redone and prices were raised to better represent real market values.
As a result of the effort, profitability accelerated from 3.9% to 7.7% in a little over two years. This was accomplished in an increasingly tightening market.