# Portfolio Management

Portfolio management is the discipline of managing the mix of products and services a company offers 💼 — deciding what to launch, what to keep, and what to kill. In the context of IBP, it is the upstream engine that drives both demand plans and financial targets.

Portfolio Management:
The ongoing process of evaluating, prioritizing, and balancing a company's product and service offerings to maximize value while managing complexity and resource constraints.

Most IBP implementations underweight portfolio management. Teams pour energy into perfecting demand forecasts and supply plans while ignoring the fact that portfolio decisions — launching a new SKU, discontinuing a slow mover, or cannibalizing an existing line — reshape the entire planning landscape overnight.

# Why It Matters to IBP

Portfolio decisions ripple across every IBP domain:

Revenue mix — A handful of SKUs typically drive the majority of revenue. Understanding which products contribute margin vs. which consume resources is foundational.
Complexity costs — Every active SKU carries hidden costs: warehouse space, planning effort, supplier management, quality oversight. More SKUs does not always mean more revenue.
Resource allocation — Engineering, marketing, and manufacturing capacity are finite. Portfolio management forces trade-off conversations that prevent the organization from spreading too thin.
Forecast accuracy — New products are inherently harder to forecast. A bloated portfolio with too many recent launches degrades overall planning performance.

# Key Activities

NPI is the process of bringing new products from concept to commercial availability. Within IBP, NPI demands cross-functional alignment because every new launch affects demand assumptions, supply capacity, and financial projections simultaneously.

What good NPI governance looks like in IBP:

Stage-gate milestones are visible in the demand plan at least 2-3 cycles before launch
Supply planning has confirmed capacity and materials availability
Finance has validated margin assumptions and cannibalization estimates
A clear demand signal (even if assumption-based) is loaded into the consensus forecast

Rationalization is the systematic review of the existing portfolio to identify candidates for simplification or elimination. The goal is to reduce complexity without sacrificing meaningful revenue.

Common rationalization criteria:

Revenue contribution below a defined threshold (e.g., bottom 20% of SKUs by margin)
Declining volume trend over 3+ consecutive periods
High carrying cost relative to contribution margin
Availability of a substitute or successor product
Customer concentration risk (single-customer SKUs)

Lifecycle management bridges NPI and rationalization by actively managing products through their lifecycle stages. Each stage requires different planning assumptions, inventory strategies, and commercial attention.

The planning handoff matters: As a product moves from growth into maturity, the forecast method should shift from assumption-driven to history-driven. When maturity gives way to decline, inventory policies should tighten to avoid obsolescence. These transitions rarely happen automatically — they require deliberate portfolio governance.

# The Portfolio Review

The portfolio review is a recurring meeting (typically monthly) that serves as a critical input to the IBP cycle. It sits upstream of demand review and shapes the assumptions that flow through the rest of the process.

What the portfolio review covers:

Status of active NPI projects and stage-gate decisions
Rationalization candidates and discontinuation timelines
Cannibalization impact from upcoming launches on existing products
Lifecycle stage reassessments for key product families
Strategic alignment — does the current portfolio support where the business is heading?

Who attends:

Product management (owns the agenda)
Marketing and commercial leaders
R&D or engineering representatives
Supply chain planning (to flag capacity and inventory implications)
Finance (to validate margin and investment assumptions)

# Portfolio Decision Types

Not all portfolio decisions are created equal. The table below maps common decision types to their IBP planning impact.

Decision Type	Description	IBP Impact
Launch	Introduce a new product or variant	New demand signal required; capacity and materials planning triggered; financial model updated
Hold	Delay a planned launch or change	Demand plan adjusted; committed supply may need unwinding; revenue gap identified
Discontinue	Remove a product from the active portfolio	Run-out plan needed; last-buy quantities calculated; substitute product demand adjusted
Cannibalization	New product expected to absorb existing demand	Net demand impact modeled; affected SKU forecasts reduced; inventory draw-down planned
Refresh / Reformulate	Update an existing product (packaging, recipe, spec)	Transition plan required; old-to-new inventory cutover managed; demand continuity assumed

# Connection to Demand and Financial Planning

Portfolio decisions are not made in isolation — they are the starting point for two downstream IBP processes:

Demand planning depends on portfolio inputs to build an accurate consensus forecast. Without visibility into upcoming launches, discontinuations, and cannibalization effects, the demand plan is incomplete by definition. The best demand teams treat portfolio review outputs as mandatory forecast assumptions.

Financial planning uses portfolio decisions to validate revenue and margin projections. Every launch has an investment profile; every discontinuation has a write-off risk. The portfolio review is where finance gets early warning of changes that will hit the P&L.

When portfolio management is disconnected from IBP, the symptom is always the same: surprises. Launches that supply chain didn't plan for, discontinuations that leave stranded inventory, and financial targets built on a product mix that no longer exists.

Getting portfolio management right doesn't require perfection — it requires a disciplined cadence of review, a willingness to make trade-offs, and visibility across functions. That is exactly what IBP is designed to provide.