Taming the Beast:
Amway Puts a Stop
to Waste in the
The maker of vitamins, cosmetics and nutritional items breaks down silos and sets up strict criteria to
stop costly and unnecessary changes in product characteristics.
t wasn’t just the 22,000-plus SKUs
that Amway Corp. offers to its customers through direct sales. The real
problem was the huge number of
revisions that the company was
making to those items.
A leading maker of products for nutrition, wellness, beauty and the home,
Amway operates in more than 80 countries
around the world. Revenues are around
$8bn, generated by a home sales force of
more than 3 million owners.
Like any consumer products seller,
Amway has to keep its line fresh. At the
same time, it suspected that not all of the
SKU changes it was making were justified.
An investigation uncovered substantial
waste in the process, according to senior
supply chain analyst Jerry M. Bronkema. He
and his team found that Amway was processing an average of 23 SKU revisions per
day, covering changes in raw ingredients,
label, color and packaging. Each one took
at least five hours to set up, including entry
into the system, exchanging of e-mails, and
re-pricing where necessary. What’s more,
thanks to the speed of change in product
characteristics, fully one-quarter of those
revisions never even made it to market.
Naturally, many of those involved in the
process defended it as “the way we have
always done it,” recalls Bronkema. But
Amway wasn’t about to settle for the status
quo. “Culture change,” he says, “had to happen.” The company launched a kaizen
event—a limited-scale effort to address a
specific business problem—with an eye
toward gaining control of SKU revisions.
Teams were formed and invited to toss
around ideas for improvement. The goal
was to develop clear decision-making crite-
ria for any SKU revision. Some were the
result of a lack of understanding by the indi-
vidual making the request. Others were vir-
tually automatic responses to uncertainty.
Few ever stopped to ask whether a new
SKU was even necessary. The unwritten
mantra: “When in doubt, rev.”
The kaizen event spanned five days and
involved individuals from manufacturing,
supply-chain planning, information tech-
nology, warehousing, packaging research
and development, product formulation,
item data management, quality assurance,
procurement and global trade. Overseeing
the effort was a functional leader from sup-
ply-chain planning and representatives of
TBM Consulting, an outside expert in Lean
and Six Sigma quality training. Together
they scrutinized the entire SKU revision
process, nailing down all areas of waste and
devising a document for the new process.