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The
company illustrated above had seven regional factories. They
had organized into divisions and each division served a
different end-customer group. The plant's product
lines, however, did not correspond to the marketing
divisions. Each plant served more than one division.
The divisions were, effectively, the plant's customers.
The
charts show operating margin as a function of focus. On the
left, focus is gauged by the number of divisions served. On the
right, focus is measured by the number of product lines at a
particular plant.
By
either measure, increased focus correlates to increased
profitability.
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One
major product was common to all plants, "Product X".
The margins for Product X do not decline as steeply with
decreasing focus as the overall margins, but they still follow
the same pattern.
The
conclusion: adding
low-volume products to a high volume factory will lower the
high-volume product margins.
Adapted
from: Hayes, Robert H., & Wheelwright, Steven C., Restoring
Our Competitive Edge, Wiley, 1984
Other Studies
Up
Reduced Overhead In Focused Factories
Multi-Division Companies
Steel Foundry Focus
Basic Metals
Workcell Level Focus
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