Accelerated Improvement Program
The Accelerated Improvement Program has been the Group’s vehicle for profitability and focus. The program included five initiatives, of which the first two were the most relevant for the margin recovery. In short, the program aimed to increase the operating margin to at least 10 percent by improving the mix of products and brands sold and reducing the product cost. Due to unfavorable developments in foreign exchange rates since the launch of the program, the realization for the margin target has been delayed. The program was finalized in 2015 and will deliver full financial impact in 2016.
Focus on core brands and the most attractive product segments (“profit pools”)
Husqvarna Group has a wide and diversified range of products and accessories under many different brands that are sold through the retail and dealer channels to reach targeted end-customers.
Selling the right mix of products, accessories and spare parts is key
The main objective of this initiative is to grow selectively and sell the right mix of products to the right customers. Product categories and brands vary in terms of attractiveness and some are more profitable than others. Naturally, it is essential to focus on areas with profitability above average. For Husqvarna Group, this translates into Husqvarna and Gardena in terms of brands, and to product segments where the Group has leadership positions: professional handheld products, robotic lawn mowers and watering products. In addition, accessories and parts constitute an attractive area and thus an important part of the initiative.
Focusing resources is an important enabler
These prioritized product segments and brands represent a large portion of sales and a significant share of profitability. Resources in marketing, product development and sales have been focused in these areas accordingly during the program.
In 2015, sales in profit pool segments had a growth rate exceeding the average of the Group.
The Operational Excellence Initiative aims to secure competitiveness by setting the right product cost and complexity.
Cost reductions are driven by cross-functional teams in purchasing, product development (R&D) and manufacturing. Savings may be classified in three main categories: reducing the cost of sourced components and parts realized by purchasing activities, value engineering efforts, which means utilizing R&D resources to find smarter solutions for already existing products (i.e. introducing a smarter design that leads to lower costs without sacrificing product performance) and productivity and efficiency savings in manufacturing. The Group is well on its way to achieving a 10 percent reduction in direct material costs for 2016 compared with 2013.
Cost reductions are supported by significant complexity reductions in the product offering. Complexity often leads to hidden costs in areas such as product development, sourcing, manufacturing, inventory and distribution. Since 2013, the number of product SKUs (Stock Keeping Units) has been reduced by the targeted 30 percent.