Kiilto is known in its field for its customer orientation, where the customizability of products is a strong differentiating factor. However, over the years, products tailored to customers' wishes have formed, in fact, an unnecessarily broad portfolio, which has also brought challenges to production capacity.
─ We need to examine the existing product portfolio and take the necessary measures. Only after that does it make sense to increase the efficiency of production, explains Kiilto Oy's Deputy Managing Director Mikko Viljanmaa, the starting points of a strategically significant development project.
Data from different sources form a view of the overall profitability of the value chain
The first step in the product management development project was to form a reference framework that could be used to assess the profitability of products objectively. The data-based calculation model ensures that everyone has the same view of the profitability of the product, and decisions will not be based on opinions or guesswork.
However, quite soon after the start of the development project, it was noticed that the margin per item provided by Kiilto's cost calculation alone did not give a sufficiently accurate picture of the profitability of the products. It was essential for the critical appraisal that an overall view of the product portfolio could be created, combining cost elements, manufacturing data, sales data, and other criteria such as environmental friendliness and product brand. Data from numerous sources had to be combined into one coherent entity.
A data-based calculation model helps to make the value judgment of the product portfolio
Insta's team developed a tool for Kiilto's needs, a four-fold table, which combines data from different stages of the value chain and reveals problematic items in the product portfolio.
─ Insta's team had the idea of building a four-fold table to model the profitability of the products and the requirements for production volume.
It describes the situation well and broadens the perspective of the review. Too narrow a view could have led to measures not being taken on the product range, says Viljanmaa.
The information from the four-fold table is deepened into a product-specific control view that gathers data related to a single product item. The tool simulates, for example, the cost implications of different functions and reveals where the problems with the product arise.
─ Insta helped us verify the calculations we made and the data we collected. They also brought in useful tools that we did not already have in place. The data was ours, but Insta brought the tools to analyze it, Viljanmaa points out.
The goal is annual savings of over one million euros
In addition to a shared understanding and a common frame of reference, one of the key objectives was to engage the staff working on the product portfolio for change. In some cases, an external consultant may be a red rag for the staff, but Viljanmaa thanks Insta for its insight into helping Kiilto carry out a strategically important project.
─ Kiilto's employees pulled together in the project when Insta helped us create common rules of the game on which decision-making is based, says Viljanmaa and continues:
─ Insta involved our staff and gathered ideas from them on what should be taken into account in the development of a calculation model for product evaluation. In addition, Insta's way of presenting things and approaching them on a factual basis was convincing. All the elements presented are based on collected and processed information, which convinced and committed our staff, Viljanmaa says.
While the actual product review is still ahead, the goal is clear. The goal is to save up to more than one million euros annually. Easy savings are available already in a short time, for example, by combining product packaging sizes.
─ We will not reach our goal in one or two years, but we will make it. We now have good visibility and a common frame of reference to take this forward. For the first time, thanks to Insta, we were able to create a perspective that transcends the boundaries between our various functions.