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SKU Profitability Profile

The item sales activity profile ranks and classifies items based on $ and unit sales.  The A category is typically comprised of the top 5% of items and they normally account for approximately 80% of sales activity; the B category the next 15% of items normally accounting for approximately 15% of sales; and the C category the remaining 80% of items accounting for the last 5% of sales.  These three categories often makeup natural dividing points in the creation of a segmented customer service policy.

If possible an item profitability profile can be used to weed out some items from the customer service profile.  An example item profitability profile is provided below.  Note that in the analysis less than one third of the items are profitable.  Those are immediate candidates for purging.  In many of our client studies a majority of the items do not even cover their logistics costs.

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