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KNOWLEDGE LIBRARY

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27Jun

Warehouse Occupancy Percentage

Optimal storage utilization helps enforce healthy inventory management. In our early work with Honda their...

02Jun

Efficient Procurement Inventory

Efficient procurement inventory (EPI) is often required to realize steep discounts when a special opportunity...

02Jun

Inventory Carrying Rate

The inventory carrying rate (ICR) is the percent of the unit inventory value used to...

26Jun

Inventory Activity Profiling & Data Mining

Suppose you were sick and went to the doctor for a diagnosis and prescription.  When...

27Jun

Inventory Performance Measures

Inventory performance measures include financial, productivity , quality, and response time indicators for evaluating the efficiency and...

Incremental SKU Optimization

Pruning is painful. You probably know from your personal life when you’ve had to cut out certain activities or certain relationships that are not profitable or are even harmful. It comes up in supply chain strategy when someone in marketing and/or product development has to face the fact that their SKU is no longer valuable. Simplification is rarely easy, or popular. It challenges the status quo. It is in vogue in many organizations to boast about the complexity of their work, even if the complexity is non-value added and self-inflicted. In contrast, simplification is profitable and one of the key common denominators of successful supply chain organizations.

Instead of radically cutting back in the beginning our clients have had success in piloting and implementing SKU optimization incrementally. An example incremental SKU optimization from the CPG industry is provided in Figure 3.11. The program yielded a $7,000,000 increase in profitability.

Once the ideal portfolio has been developed, diligence is required to maintain it. With one retail client we implemented a simple rule requiring every new SKU introduction to be accompanied by the SKU that would be pruned as a result.

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