There have been so many things to write about the last few weeks but so little time to do it. I moderated a panel on work-life balance a couple weeks ago at HBS and I hope to write about it during the next few weeks. But now, while it’s fresh on my mind, I want to write about high levels of product variety.
On February 23rd, the Wall Street Journal reported about proliferation of toothpaste SKUs. According to the article, in January 2011, there were 352 distinct types or sizes of toothpaste at retail stores. When one examines the functions, flavors, and sizes, there could actually be more than 2,000 combinations of toothpaste! The functions include whitening, plaque prevention, gingivitis prevention, cavity protection, tartar control, long-lasting fresh breath, and baking soda & peroxide. The flavors include brisk mint, frosty mint, cool mint, crisp mint, “cinnamint”, vanilla, watermelon, and bubble gum. Toothpaste comes in gel or paste and there are multiple sizes. So maybe 352 is not that bad after all.
But 352 is utterly confusing to consumers. How on earth are we supposed to know exactly what we need when there are so many choices? And the costs of this confusion are well documented in the marketing literature. But as an operations professor, what worries me the most is all the waste associated with high product variety. Clearly there are manufacturing costs associated with high product variety. But there are also inventory related costs. While it is easy to forecast consumption of toothpaste, it’s really hard to do so at the item level when there are hundreds of different types. The difficulty of forecasting translates into poor management of inventory. And there are costs at the store level (I wrote an academic paper on this topic). High product variety drives store employees crazy because it complicates their operating environment.
On a lighter note, I was at Disneyland with my family this weekend and I ran into a situation at a store that struck me. My kids are really into Lego so our trip included spending time at a Lego store. While my kids were amazed by the huge creations at the store, including a giraffe that took more than 250,00 pieces of legos to create, I kept staring at the section that displayed hundreds of different mugs differentiated by names. Here is a photo of a small section:
Yes, maybe some people are excited to walk out of the store with a mug that shows their name. But with the proliferation of names in a multicultural world, how many of the customers will actually be frustrated that their name is not in there? Speaking of my family, none of our four names were available. Maybe we are just a weird family, but I imagine there are many families that visit Disneyland that will encounter similar disappointment.
I have no idea how much a machine that does on-demand printing would cost, but the operations junkie in me kept thinking that there must be a better way to manage this situation.