Most businesses can tell you how many SKUs they sell. Far fewer can tell you what each additional SKU actually costs to support.
Complexity doesn’t usually show up as a single line item. Instead, it spreads itself thinly across the organization:
Lower truck and container utilization
More warehouse handling steps
Higher inventory levels
Slower planning cycles
Increased damage, waste, and rework
More time spent firefighting exceptions
Each impact looks small. Together, they are anything but.
One global FMCG client we worked with had multiple factories producing the same products — but in slightly different formats, with different pallet heights, pack dimensions, and handling constraints. None of those differences were “wrong.” But collectively, they made the network far harder — and far more expensive — to run.
Product ranges grow faster than supply chains evolve.
New flavors, sizes, promotional packs, channel-specific formats – all driven by commercial logic. But every additional SKU introduces new planning variables, changeovers, forecasts, inventory positions, and packaging combinations.
The problem isn’t growth. It’s unmanaged growth.
Many businesses carry long tails of low-volume SKUs that absorb disproportionate effort across manufacturing, packaging, and logistics. These SKUs rarely get challenged because they “only” make up a small percentage of volume – even though they drive a large share of operational complexity.
Small differences in packaging often create outsized consequences.
A few millimeters difference in case height can prevent double-stacking. A slightly different pack footprint can break pallet uniformity. A customer-specific configuration might force manual handling in an otherwise automated warehouse.
Individually, these seem like reasonable compromises. System-wide, they reduce flexibility and efficiency everywhere else.
In one case, a client had dozens of pallet heights in use across the same product family; each one originally agreed to satisfy a specific customer requirement. The result was underutilized trucks, inconsistent handling, and limited ability to rebalance volumes across sites.
Complexity often grows because decisions are made locally, not systemically.
A site optimizes for its own constraints. A sales team agrees to a bespoke format to secure a contract. A warehouse adapts processes to cope with exceptions. All of these decisions make sense in isolation.
But supply chains don’t operate in isolation.
Over time, local optimization fragments the network. What works for one factory or customer increases cost and rigidity elsewhere, and no one owns the full picture.
One of the biggest red flags we see is when organizations become very good at managing complexity, instead of removing it.
Teams build workarounds. Spreadsheets proliferate. Extra checks get added. Manual processes fill the gaps between systems. The supply chain continues to function, which creates the illusion that everything is under control.
But this comes at a price:
Higher overheads
Slower decision-making
Increased risk of error
Reduced ability to respond to change
Complex systems are fragile. When demand shifts, costs rise, or disruption hits, complexity limits how quickly a business can adapt.
Complexity doesn’t just cost money. It drives emissions.
Poor pallet utilization means more trucks on the road
More changeovers and smaller runs increase energy use
Excess inventory increases waste and obsolescence
Bespoke formats often block automation and optimization
In one engagement, rationalizing packaging formats and pallet strategies removed thousands of unnecessary truck movements per year — delivering both financial savings and measurable carbon reductions.
Sustainability initiatives often focus on materials. But complexity reduction is one of the fastest ways to cut emissions without compromising service.
If complexity is so costly, why does it survive?
Because it hides well.
Costs are spread across departments
Decisions are locked in historically
No one wants to challenge customer agreements
The “risk” of change feels greater than the visible benefit
As McKinsey & Company has noted in multiple supply chain studies, complexity often grows incrementally until it reaches a tipping point — at which stage it becomes a strategic constraint rather than an operational nuisance.
The turning point usually comes when complexity is made visible in data.
When organizations model:
Cost-to-serve by SKU
Impact of packaging dimensions on pallet and truck utilization
Network-wide effects of local decisions
“What if” scenarios with fewer formats or standardized designs
Suddenly, long-standing assumptions get challenged.
In one FMCG case, modeling showed that under existing network constraints, millions in annual savings were achievable simply by reducing format variation — before any major structural changes were made.
Complexity wasn’t adding value. It was silently eroding it.
Reducing complexity doesn’t mean stripping out choice or ignoring customers. It means being deliberate.
Effective approaches include:
SKU rationalization based on cost-to-serve, not just volume
Standardized packaging and pallet rules embedded into R&D
Clear guardrails for customer-specific requests
Network-level modeling before local decisions are approved
Designing flexibility into formats, rather than multiplying formats
The goal isn’t simplicity for its own sake. It’s useful simplicity – where variation exists because it creates value, not because it’s always existed.
Organizations that actively manage complexity see benefits beyond cost reduction:
Faster planning cycles
Better resilience to disruption
More scalable growth
Lower emissions
Stronger alignment between commercial and operational teams
Most importantly, they regain control of their supply chain instead of being controlled by it.
Complexity is rarely a single bad decision. It’s the accumulation of many reasonable ones, made without a system-wide view.
The true cost of complexity isn’t just what you spend today – it’s the opportunities you lose tomorrow because your supply chain has become too rigid to adapt.
The first step is making complexity visible. The second is deciding which parts still earn their place.
Here at James Ross Consulting our first step in de-complexing / simplification is to assess the end-to-end data. What is being produced, how, where and why. Using data to drive our analysis means we are able to look across categories and functions, to build a true picture of cost. Rationalisation may then cover the SKUs themselves, or it may keep the SKU’s but simplify how they are packed, so we share volumes, maximize efficiency, reduce inventory, improve efficiency and drive-up profitability.
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