Product Mix Planning and Analysis

What Is a Product Mix?

A product mix (or product assortment) is the complete set of products a company offers to the market. When capacity, labor, or material constraints exist, a firm cannot produce every possible item at the desired volume. Strategic product‑mix planning helps you decide which products to produce, in what quantities, and when, to maximise profit while respecting those constraints.

Why Product Mix Planning Matters

• Aligns production capacity with market demand.
• Prevents costly over‑production or stock‑outs.
• Reveals hidden profit opportunities by focusing on high‑margin items.
• Supports data‑driven pricing and promotional strategies.
• Improves resource allocation across product lines.

Key Steps to Build an Optimal Product Mix

Step 1 – Gather Capability & Market Data

Collect accurate information on:

• Production capacity (machine hours, labor shifts, material availability).
• Historical sales, forecasted demand, and price elasticity.
• Fixed and variable costs for each SKU.

Step 2 – Define Constraints

Typical constraints include:

• Maximum machine hours per period.
• Labor headcount or overtime limits.
• Budget caps for raw materials.
• Regulatory or safety limits.

Step 3 – Model Demand Scenarios

Use a simple spreadsheet to create best‑case, worst‑case, and most‑likely demand scenarios. This gives you a range of possible outcomes and highlights the sensitivity of each product to demand fluctuations.

Step 4 – Apply Activity‑Based Costing (ABC)

Traditional cost allocations often distort true product profitability. ABC assigns overhead based on actual activities (e.g., set‑ups, inspections). Download the free Activity‑Based Costing Excel template to start calculating more realistic unit costs.

Step 5 – Run an Optimization Model

With demand forecasts, costs, and constraints in hand, you can use linear programming (or even Excel Solver) to maximise total contribution margin. The output tells you the optimal production quantity for each SKU.

Industry‑Specific Cases

Manufacturing – Consumer Electronics

• Constraint: Limited PCB assembly lines.
• Solution: Prioritise high‑margin flagship models; discontinue low‑margin accessories.

Software‑as‑a‑Service (SaaS)

• Constraint: Developer bandwidth for feature releases.
• Solution: Bundle core modules into premium tiers; retire rarely‑used add‑ons.

Quick Checklist for Product Mix Planning

Tools & Templates to Accelerate Your Analysis

• 101 Ways to Optimize Pricing & Profit – proven tactics to price each product for maximum margin.
• Financial Dashboard Excel – visualise profit contributions across product lines.
• Financial Statements Templates – integrate mix‑analysis results into P&L and cash‑flow reports.
• Productivity & Time‑Management Strategy Pack – improve labor scheduling to support the optimal mix.

Next Steps

Start by downloading the Activity‑Based Costing Excel template, map your constraints, and run a quick optimisation scenario. When you’re ready to deepen your pricing strategy, explore the 101 Ways to Optimize Pricing & Profit guide for actionable pricing levers that complement your product‑mix decisions.