Complexity Management in a FMCG Business-to-Business Product Portfolio

Details

Supervisors

Semal, Pierre

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion

Abstract

In the FMCG industry, product variety is increasing, not only on the final customer level, but also in business-to-business relationships. Market-dominating retailers pressure manufacturers to adapt business-to-business sales units to their individual requirements concerning assortment and size. This increased product portfolio complexity leads to increasing costs while margins are already critical in the FMCG industry. Literature suggests different complexity management strategies, such as standardization, platforms and modularization, as essential measures to keep product portfolio complexity manageable and to reduce respective costs. However, research has been focused on complexity management in the electronics, automotive and aerospace industry and on product variety for end consumers. The thesis aims at contributing to the research field of complexity management by adapting complexity management strategies suggested in the literature for other industries to the requirements of the FMCG industry in business-to-business relations. The objective is to identify the relevant cost drivers regarding complexity in the supply chain of the fast moving consumer goods industry and to evaluate the respective cost reduction potential of the different complexity management strategies. In order to reach this objective, the complexity management strategies are applied to the product portfolio of copacking products of the branded consumer goods segment of Henkel AG & Co KGaA in the business unit of Beauty Care Germany and evaluated with the Arena Simulation Software. The results of the study show that all three strategies show a significant cost reduction potential regarding process, material, storage and warehouse handling costs compared to the status quo in the business case of Henkel AG & Co KGaA. Considering both the costs and the retailer’s perspective, the modularization strategy yields the most advantageous results.