![]() ![]() So there's a lot more work to be done, but at least management, under a new CEO, is finally putting in the effort. Results are heading in the right directionĪt this point, Stanley Black & Decker is less than halfway through the product rationalization effort. That it required a deep drop in performance and a huge stock decline to prod management into stepping back and doing the hard work is somewhat disappointing. It clearly seems as if buying the next company or brand took precedence over fully integrating each new acquisition into the overall company. That's particularly true if a company ends up being a serial acquirer, like Stanley Black & Decker. Buying companies can lead to swift growth, but it can also lead to inefficiencies over time. Second, the fact that Stanley Black & Decker has the room to eliminate 70,000 SKUs hints at the depth of the problem the company faces after a long series of acquisitions. While eliminating 70,000 SKUs clearly won't be a simple or quick process, it could end up being well worth the time and effort if it creates a more efficient and profitable organization. That will free up production capacity for other, hopefully higher-margin, fare or could allow the company to slim down its factory portfolio, which is another effort being undertaken. There are two takeaways from this that investors need to think about.įirst, assuming the company can sell replacement products as expected, there are material cost savings that will come along with the pruning process. Yet management is very confident that the financial impact will be minimal because it has "suitable substitutes" to replace the products that are going away. That's a huge number of individual products, or SKUs. It has plans to kill another 50,000, bringing the total to around 70,000 individual products. The number of products going away is staggeringĪll of that said, Stanley Black & Decker has already eliminated 20,000 individual products from its lineup. These are hypothetical examples, but they get the idea across. If a nonprofessional wants that measure, he or she can buy the DeWalt. However, it's more likely that a professional will want a longer, wider, and more robust tape measure, which might come under the DeWalt brand. ![]() If a professional wants that length and simplicity, he or she can buy a Black & Decker-branded tape measure. For example, a 16-foot tape measure with no bells and whistles might be just fine for everyday home use. In fact, there might even be a place for multiple versions of something as simple as a tape measure. So the company can't collapse down to a single brand or product to serve all needs. These are different markets with different needs. For example, an electric drill from Black & Decker would be built for and marketed toward a nonprofessional audience, while a DeWalt electric drill would be designed for and sold to professionals. To be fair, there are some products that require the same basic tool to be produced under multiple brands. You can imagine the same thing taking shape across various tool categories, from hand tools to power tools. There are clear redundant costs here, and that's just one example. And still, the company has to make all of them, with unique design, production, labeling, and distribution. By definition, and because of the inherent simplicity of the product, they're all far more similar than they are different. For example, a simple tape measure, an essential tool that professionals and novices alike use, is something many of the company's brands offer. That's resulted in a lot of redundancy across the company's product lineup. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |