Section J. Too Many Entity Types (Products)


J. Too Many Entity Types (Products)

Overview

Due to many reasons, we might come to the conclusion that we have too many products (different entity types) in our portfolio. Although this is more of a product or service design-related problem, there are some simple approaches that yield beneficial results.

Examples

  • Industrial. Too many Stock Keeping Units (SKUs), product codes, or manufacturing codes

  • Healthcare. Too many surgery offerings, lab tests

  • Service/Transactional. Too many service combinations, possible transaction types

Measuring Performance

Measuring can be considered very easyjust count the number of entity types. Conversely, we might be more interested in margins by entity type, which can involve some convoluted financial calculations. This is probably one for the finance leaders to decide what benefit they are looking for in reducing the number of entity types.

Tool Approach

First we must get an understanding of the current performance:

First the metric itself needs to be agreed upon by the Champion, Process Owner, and Belt. Next look at validity of the metrica sound operational definition and consistent measure versus a detailed investigation of Gage R&R. For more detail see "MSAValidity" in Chapter 7, "Tools." Even something as simple as counting the number of different entity types can lead to disagreementdon't assume anything!

Make a current count based on the chosen metric. There will always be somewhat of a moving target, so draw a line chronologically and make the count at that point. There will be some disagreement on what constitutes a separate product or entity type. Revert back to the clear operational definition from the MSA on a regular basis.


If not already done, conduct a Demand Segmentation on the entity types:

Demand Segmentation will allow us to understand the volume and variation in demand of each of the different entity types that progress through the process. It will highlight those entity types that are highly variable in demand with low volume. It is this set of entity types that will be the focus rather than the high volumes.

The first examination of the entity types will be fairly low tech, but could be controversial depending on the businesses ability to "let go" of types.

The Team and any necessary internal consultants examine the list of entity types looking for exact matches and therefore obvious redundancy. This sounds trivial, but can account for as much as a 50% reduction in types.[4]

Construct a Cause & Effect Matrix on the entity types. List the types as the Xs and list the following Ys, noting that the value of each might have changed after the first pass reduction:

  • Profitability

  • Volume

  • Number of Customers

  • Strategic importance (e.g., new technology)

  • Uses standard raw materials (in the C&E, use the relationship scoring as follows: 0all standard to 9problematic)

The bottom end of the C&E lists prime targets for removal from the portfolio. Look to

  • Discussing the entity type with the Customer to see if anything else is suitable (VOC)

  • Educating the Customer on substitute entities


[4] One SBTI ink-manufacturing client applied this simple sweep to its portfolio of inks and discovered an array of 59 different white products. The quote "A white is a white is a white" pretty much sums up the impact of the reduction.

There will inevitably be low-volume, high-variability types that we have to keep in our portfolio. For these consider

  • Outsourcing the entity type

  • Consolidating the entity type across a number of sister sites in the company, so only one site deals with this specialty request and thus sees higher volume (and typically less variability accordingly)

  • Moving to a Platform Technology that allows a modular entity

  • Developing a whole new replacement entity that is generic enough to replace multiple entity types (Lean Design For Six Sigma would pay dividends in this case)[5]

    [5] See Commercializing Great Products with Design for Six Sigma by Randy Perry and David Bacon (Prentice Hall PTR, ISBN: 0132385996).

  • Constructing a line (process area) that specifically deals with the low-volume, high-variability entities. As such this area would need rapid changeover ability and a responsive custom approach

  • Examining options to keep the entity "vanilla" longeris it possible to pre-prepare any parts of the entity so less work is required from the point of request?

For all of the solutions outlined, Control is the hardest piece. The portfolio of entity types came to be in this proliferation for a reason. Control will involve looking at the Entity Change process and ensuring that new entity types cannot be randomly added without first considering the use, or removal, of existing types.

Proceed to the Control tools described in Chapter 5 and sincerely the best of luck on this one!




Lean Sigma(c) A Practitionaer's Guide
Lean Sigma: A Practitioners Guide
ISBN: 0132390787
EAN: 2147483647
Year: 2006
Pages: 138

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