The reduction of product and process complexity based on the quantification of product complexity costs

Complexity management is an increasing challenge for industrial companies. To address this issue, this paper develops a procedure to reduce the complexity of products and processes. This procedure includes five steps: (1) definition of the scope of the products and processes to be included in the analysis, (2) grouping of products into A,B, and C categories, (3) identification and quantification of the most important complexity cost factors, (4) identification of initiatives for the possible reduction of complexity costs and the quantification of possible cost savings, and (5) evaluation and prioritisation of initiatives. To test the usefulness of the suggested procedure, it was applied at a globally leading manufacturer of mechanical consumer products. The case study demonstrated the usefulness of the proposed procedure in (1) supporting the allocation of complexity costs in relation to individual product variants, (2) achieving a better understanding of the cost structure of product assortment and business processes, and (3) providing a basis for generating and evaluating initiatives aimed at reducing the complexity of products and processes. The case study also showed that the use of the procedure can produce considerable financial benefits.