What does SKU rationalization mean?
At its most basic meaning, SKU rationalization is the process of deciding which products to keep (or improve) and which ones to discontinue — all with the goal of improving your organization’s bottom line.
What is inventory rationalization?
Definition: Inventory Rationalization The action of attempting to explain or justify behavior or an attitude with logical reasons, even if these are not appropriate. The action of reorganizing a processor system so as to make it more logical and consistent.
How do you approach SKU rationalization?
SKU Rationalization Methodology
- Refresh your marketing approach.
- Review recent sales data.
- Survey your customers on their favorite products.
- Recategorize all of your products.
- Predict your sales cannibalization and switching rates.
- Update your financial projections.
- Repeat this process every three to six months.
What is product rationalization?
Product rationalization is the process of eliminating products that contribute negatively to the strategic organizational goals. It explains how to identify, quantify and allocate complexity costs to product variants, how to eliminate product variants effectively and how to ensure that benefits are captured.
Why SKU rationalization is important?
SKU rationalization leads to smarter business decisions and improves several areas of a business’s operations including; Reducing inventory carrying costs. Streamlined inventory management workflows. Less shrinkage caused by stale or outdated inventory.
How do you manage SKUs?
The best way to manage SKUs is to implement a simple format to ensure an easy-to-memorize structure. Avoid letters and numbers that could be mistaken for one another, and always use capital letters to prevent confusion. Group all of the similar products together, and keep SKU codes short.
Why do we SKU rationalization?
What is right sizing inventory?
Right-sizing means having the right inventory at the right place. If Product A is popular in Location 1, and Product B is popular in location 2, then the inventory of product A in location 2 is not really helping and vice versa.
What is the purpose of SKU rationalization?
SKU rationalization is a process that allows merchants to measure the profitability of the products they’re stocking. It uses metrics such as inventory and storage costs, supplier fees, and historical sales data to help determine whether an item should be discontinued or retained with some adjustments.
Why is SKU rationalization important?
What is SKU proliferation?
In its simplest terms, SKU Proliferation is the process in which a retailer or distributor increases the number of products (SKUs) that it offers to customers. For example, a distributor of hygiene products might start out offering just five different SKUs for toothpaste.
What is the issue with having too many SKUs?
Companies with too many SKUs will run out of physical space in storage centers, will have more difficulty working with stock, will spend more money finding, sorting, and shipping stock, will tie up capital in dead and obsolete stock, could have tax issues relating to the extra inventory, and even have issues with …
What is the purpose of SKU rationalization in business?
What is SKU Rationalization? SKU rationalization is the process of analyzing the impact to an operation that will come from adding, discontinuing, or maintaining a particular product or product line. The goal is to understand this impact, and to use it to rationalize, or justify, the course of action that is ultimately taken—whether
Why is it important to understand SKU proliferation?
By understanding the costs of SKU proliferation, it is possible to make more intelligent business decisions regarding adding or discontinuing product, and to make investments in technology that can help you become more efficient and productive.
How does adding a SKU affect the supply chain?
After all, adding even a single SKU has the potential to impact many aspects of the supply chain, from replenishment to slotting to tracking, and everything in between, especially if the new SKU is drastically different in size or dimension than what has been offered until now. Need an Expert Opinion?