The document discusses conducting a product audit to evaluate existing products in a company's portfolio. It recommends forming a Product Audit Committee made up of key stakeholders to regularly review each product using a standardized rating form. The audit should assess factors like a product's market potential, ability to meet customer needs, financial performance, and risks from competitors. The committee would use this process to determine if changes are needed, such as modifying a product's positioning, adding new features, or discontinuing weak performers. By periodically auditing products, a company can optimize its portfolio and make strategic decisions to improve profitability.

1. Familiarity of the “product audit”
Summary: A new product line under your responsibility or you has just landed a new job
with products that may be unfamiliar. You’ve probably already been asked to resolve a
crisis or two and help out with a big account that needs attention. Since there aren’t any
time-outs in business, you must tackle these immediate issues with little knowledge of
the product, the politics, or the market,
The new product manager, want to make sure you have a complete picture of your
product’s health. You may know where you want to go, but if your product has some
wasting disease, you won’t be able to get there! Don’t let other people in the company
form your own opinion of your product use your knowledge of the product to your
advantage and leverage to impartially understand. Do a product audit.
When to pull a product from the line is as important as knowing when to introduce a new
one. Consider such internal requirements as profitability, available resources and new
growth opportunities. Examine external factors of sales-force coverage, dealer
commitment and customers’ needs to determine if a comprehensive line is required.
The first step in establishing a regular product evaluation program is to create a
Product Audit Committee. The committee may consist of members of the planning team
or a separate group. This core group comprised of the top people in the marketing,
finance, engineering and purchasing departments, should control decision-making
authority about the design of the company’s product mix. Depending upon the dimensions
of the product mix and the significance of the products, the Product Audit Committee
should meet monthly and every product should have at least an annual review
WHAT IS A PRODUCT?
A product is a problem-solver, in the sense that it solves the customers’ problems, and is
also the means by which the company achieves its objectives. And since it is what
customers actually get for what they pay, it is clearly a subject of great importance.
The clue to what constitutes a product can be found in an examination of what it is that
customers appear to buy. Customers have needs, and they buy products to satisfy them.
On market segmentation. At its simplest level, someone who needs a hole may buy a drill.
But if a better way of making a hole is invented say a pocket laser – demand for drills
may fall. The important point about this is that a company which fails to think of its
business in terms of customer benefits rather than in terms of physical products or
services is in danger of losing its competitive position in the market.
In Additional: When a customer buys a product, even as an industrial buyer purchasing a
piece of equipment for a company, he or she is still buying a particular bundle of
benefits perceived as satisfying Their own particular needs and wants.
What is a product audit?

2. A product audit is an objective description of the current state of your product. The
simplest audit I have seen consisted of an inbound and outbound Strengths Weaknesses
Opportunities Threats (SWOT) analysis.
About the Product Audit
One easy-to-install procedure with direct impact on profitability is the product audit.
Just as regular physical examinations are essential to maintain the body’s good health,
likewise, products require regular examination to determine whether they are healthy,
need re-promotion, or should be allowed to phase out.
Begin your product audit by setting up a Product Audit Committee The product audit can
assist the following:
1. Determine your product’s long-term market potential.
2. Assess the advantages and disadvantages of adding value to the product.
3. Alter your product’s market position compared to that of a competitor’s comparable
product.
4. Evaluate the chances of your product being displaced by another product or
technology.
5. Calculate the product’s contribution to your company’s financial goals.
6. Judge if the product line is filled out sufficiently to prevent your customers from
shopping elsewhere.
In addition to the above criterion, consider such issues as availability of money and
human resources, assessment of new product and market growth opportunities, and even
the effective use of your executives’ time. Also, add such factors as your firm’s
willingness to sustain sales-force coverage, dealer commitment and ongoing eagerness to
respond to changing customers’ needs.
Product audit criteria
I. Operational/functional: Verify that sub-assembly or final product conforms to the
Functional/operational test criteria.
II. Dimensional: Compare actual recorded measurement(s) of the selected
characteristic with the approved design data. Verify characteristics are inspected using
the correct calibrated tooling, gauging, fixtures, etc., surface finish dimensions and
radius meet drawing tolerances, inspections are performed in proper sequence,
III. Visual: Inspect part for obvious external defects; (e.g., corrosion burrs, handling
damage, and scratches)
IV. Identification: Compare actual identification plates, tags, markings etc. with
approved design data or purchase order requirements and verify that identification is
maintained throughout the product line;.
V. Documentation: Verify the latest revision level or changes, proper work instructions,
completed operations, proper authorizations; proper use of statistical sampling;
VI. Special Processes: Verify special processes are in accordance with approved process
specifications. Verify operator qualification/certification;
VII. Material: Verify that incoming raw material meets its specification requirements.

3. Product Audit Program:
How does such a committee operate? To do justice to each product and to have an
objective basis for product comparisons, a common rating form should be used. For
products that appear dubious and thus demand careful evaluation, a product audit form
using a simple 1 to 5 scoring system using the above six criteria.
Phasing out weak products, the decision to drop them requires careful consideration of
company’s obligations to the various parties affected by the decision. Supplier and
customer notification and an adequate stock of replacement parts may be necessary
Conclusion: Finally, phasing out weak products or exiting a market requires careful
consideration of your company’s obligations. For instance, there may be significant costs
related to labor agreements, maintaining capabilities for spare parts, contractual
relationships with dealers and distributors, financial institutions and so on. In sum, the
product audit provides a practical approach to the profitability and the decision-making
process.