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KNOWLEDGE LIBRARY

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MOST READ

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...

SKU Pareto Analysis

SKU optimization, often referred to as SKU rationalization or SKU portfolio management,  is one of the first, best, and most important steps in inventory strategy development. When we begin RightStock™ projects we habitually find that about a third of the SKUs are profitable, about a third are breaking even, and about a third are losing money. If you could only take one of the steps recommended in this book, this would be it.

Below are several examples of Pareto’s Law working in SKU revenue and profitability. Figure 3.2 is from a RightSKUs™ analysis in a biotechnology company. 5% of the SKUs yield the first 67% of revenue; 10% yield 81%; and 20% yield 92%.

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