Image Credit: With Associates
As product managers, I think that we all realize that in order for our product to be a success, it has to make money for the company. In order for this to happen, people have to buy the product for more than it costs the company to make and deliver the product. We product manager tend to spend a great deal of our time trying to create a product development definition that allows us to come up with ways to get potential customers to turn into real customers. However, perhaps we should be spending our time trying to come up with ways to lower the cost of creating our product. Over at the Swedish home furnishings giant IKEA this is exactly what they are in the process of doing. Perhaps we can learn from them.
Identifying The Product Packaging Problem
So what’s the problem? In short, there is a very good chance that your product may be costing the company too much to ship to your customers. This isn’t a good thing to have on your product manager resume. Over at IKEA they have realized that they have a problem. The company is currently working to make their bottom line grow by 74% in the next 6 years. In order to make this happen, they need to find ways to boost their efficiency.
A case in point for IKEA was their Texture lamp. This is a popular product that was constructed using 33 different components. However, when IKEA took a look at their costs, they discovered that they were spending a great deal of money to deliver these lamps to their stores and to customers who ordered the lamp online. Clearly something had to be done.
What IKEA did was to go back and take a closer look at how they were packaging this lamp. What they found was that there was room for improvement. They started to make things better by first reducing the number of components that went into making the lamp from 33 parts down to just 9 parts. The next thing that they did was to find ways to cut the weight of the packaging. This resulted in the product becoming 28% lighter than it used to be. Finally, all of these changes resulted in IKEA being able to now fit 128 lamps onto a shipping pallet instead of just the 80 that they used to be able to.
Solving The Product Packing Problem
These types of product issues are not things that your average product manager is going to be able to solve by themselves. Instead, you are going to have to work with a team of people with different sets of skills in order to create product packaging solutions that still allow your products to arrive safely but which do not contain extra unneeded bulk or weight.
At IKEA they pulled together a team of designers to find a way to engineer the costs out of their supply chain that was being used to deliver their Ektorp sofa. The sofa was originally designed as a solid piece. When the team took a look at redesigning it, the first thing that they did was to break it into multiple pieces. In order to help it pack flat, they made the armrests be detachable.
This was a good start, but it wasn’t enough. The team took the redesign farther. They added a hinged back that also added to the ability to pack the sofa flat. The result of all of these changes is that the resulting package size was 50% less than it had been. From IKEA’s perspective, this packaging redesign resulted in the need for 7,477 fewer trucks being required to move sofas. Finally, the redesign lowered the price of the sofa for customers by 14%.
What All Of This Means For You
Product managers are responsible for making their product become a success. We like to spend our time trying to make our product appeal to new customers, but all too often we don’t spend a lot of time thinking about what our product manager job description says about considering the company’s cost of delivering our product to stores and customers. IKEA has been thinking about this and they’ve started redesigning their products to reduce their packaging costs.
An example of the types of changes that IKEA is making can be seen in their Texture lamp. In order to make this product cost less to ship, the engineering team reduced the number of parts that were used to make it and then they changed the packaging to make it lighter to ship. This same redesign technique was used on IKEA’s Ektorp sofa. The single unit sofa was broken into multiple pieces and parts were made to be detachable in order to allow it to pack flat. The resulting savings in shipping costs where then passed on to customers in the form of a lower price.
In order to be a successful product manager we need to take the time to consider all aspects of our product. Not only does this include how we are going to attract more customers, but it also has to include how much it’s going to cost to get our product into customer’s hands. Creating teams to look for ways to reduce the packaging costs of our products is yet another important part of the product manager’s job.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do think that a product manager can go too far when trying to reduce the packaging costs of their product?
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What We’ll Be Talking About Next Time
If you like sports, then you like ESPN. ESPN is the dominate force in the world of broadcasting sports. In fact, they are so much a part of sports today that it’s almost hard to remember a time when they didn’t exist. However, there was a time that sports fans had to hunt in order to watch their favorite game. Somehow this all changed and now we instinctively go to ESPN in order to find out what is going on in the world of sports. How did the ESPN product managers create a product development definition that allowed this to happen?