Managing the Complex Product Spin-Off

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For any number of reasons, enterprises occasionally find it beneficial to either split off or spin off products, product lines, business units or other subdivisions of their operations.

Spinning off a product line or splitting off a unit involves a wide array of financial, operational and compliance considerations. Indeed, the levels of complexity involved in these actions can be daunting for larger complex organizations, but smaller enterprises also have much to think about when the decision to go separate ways has been made.

The process of identifying what goes and what stays and who goes and who stays requires careful consideration. But beneath the obvious asset and workforce questions are many hidden, and thus, less easily identified items to identify, evaluate and separate. Our focus is the identification, isolation and separation process at the product level.

Complex Product Considerations

Product considerations include specific parts, shipping/storage requirements, fabrication and processing hardware, supplier connections, production resources and physical inventory.

Within the product, part and assembly structures there may be items that are used in other products that may not be included in the separation operation. Regardless, the enterprise involved must be able to identify specific parts that will be removed from their own inventories and supply-chain systems as well as those that are staying—even if they are staying as parts that are common to the spin-off enterprise and the parent.

For the new enterprise, this impacts their own requirements in terms of seeking out suppliers and maintaining existing relationships with other suppliers. In some cases, the parent may even become the supplier of specific parts modified to accommodate the unique requirements of the new enterprise.

For example, consider a manufacturer of air-handling equipment or HVAC systems. It may be that spinning off a residential business unit to allow the parent to concentrate on larger commercial clientele is found to be desirable for achieving overall growth of both businesses. Potentially, both units may require certain common components such as fans, heat exchangers, duct components or smaller parts like connectors, wiring, fuses and assorted switches.

Being able to separate out bills of material for finished products and larger assemblies and identify duplicate parts within those assemblies is a necessary part of the separation process. Identification of the specific parts, their origin, costs and other data is essential to both parent and spin-off.

How Can Configure-Price-Quote Software be Help Manage the Complex Product Spin-Off?

Technology can make this identification process much easier. Inventory management, supply-chain management and ERP or MRP systems can be beneficial in identifying the origin and flow for specific products and their associated bills of material. CPQ systems contain useful information related to the modification or selection of specific parts for inclusion in certain product models or assemblies.

CPQ tracks the most basic parts and components used for all finished products sold by the enterprise. Data maintained within CPQ identifies price, origin and even regulatory requirements related to each specific product or part. Additionally, dependencies such as co-requisite and pre-requisite requirements are also identified.

This will facilitate the creation of accurate lists that identify the products and parts staying and not involved in a potential spin-off, as well as those parts that will no longer be required by the parent company. Especially important is the identification of those parts that will be required by both parent and spin-off.

The Importance of Data in Business Processes and Opportunities

This data is key to ongoing business processes such as inventory management, supply-chain management, revenue forecasting and expense forecasting.

The data also facilitates the identification of opportunities for the parent as a future supplier to the new spin-off.

It makes the separation of the two operations much easier by providing a new, clear bill of materials for both the new entity and the parent enterprise.

In addition to specific product data, a CRM system is helpful in identifying customers that may be impacted by the spin-off. Some customers will obviously end up with a new supplier once the split is completed. It is helpful to all parties to have some advance understanding of how the spin-off will affect future relationships.

The parent will need to know if the existing customers will still require other products, the new entity will need to know the composition of their “existing” customer base and the customer will need to know who their vendor or supplier is for all products involved.

CPQ will identify affected products and configurations, and CRM will identify what customers are involved.

The day following the separation of the businesses, both organizations will benefit from having operational integrity in terms of part and supply requirements needed to produce and deliver their respective products.

Perhaps, more importantly, customers will know and understand who their suppliers are for future transactions.

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