Naples, Fla. — Not too long ago, kitchen and bath products giant Kohler Co. found that it was overflowing with products.
“We had 29,000 SKUs in kitchen and bath, but we were getting 96 percent of sales from only 20 percent of those products,” Kohler executive Steve Cassady said at the 2016 Plastics News Executive Forum, Feb. 15-17 in Naples. “We started to think about cutting off the tail, but our customers liked getting a unique piece or product.”
But something had to be done at Kohler, a 142-year-old commercial giant based in Kohler, Wis. Cassady serves as vice president of supply chain and operations support for the firm, which has annual sales of $6 billion.
“We needed to drive from a cost standpoint and provide excellent service as well,” he said. “We had a high quantity of low volume products with minimal profits. Complexity comes with a price.”
To succeed, Kohler determined areas in which to provide superior service, and the firm then designed its supply chain for that performance.
“We had to find out if we were underserving or overserving certain markets,” Cassady explained. “A lot of SKUs couldn't be forecast.”
Kohler also created a measure for SKU profitability performance based on operating income.
“Each SKU should have a role in the portfolio,” Cassady said.
A discontinuation process also was put in place, which gave Kohler options such as altering a product's engineering or price if it wasn't performing to target.
“We made determining the role of an SKU the centerpiece of the production process,” Cassady added. That determination included figuring in all costs when calculating an SKU-specific cost of complexity, and driving complexity reduction by “trimming the tail” of Kohler's product portfolio.
“And you can't make this a one-time event,” Cassady said.
Kohler also is doing work in the area of sustainability. The firm's Net Zero 2035 program aims to reduce Kohler's carbon and solid waste footprint by 3 percent per year in order to reach zero by 2035. Since 2008, Kohler's greenhouse gas emissions are down 8 percent, water consumption is down 22 percent and waste generation is down 42 percent.
“Sustainability shouldn't be about massive trade-offs,” Cassady said.
