As material handling companies focus on expanding their product offering to customers, the deployment of Stock Keeping Unit (SKU) is a viable route to growth. Many companies have turned to “SKU rationalization.” This method of inventory tracking reduces model numbers based on poor performance, duplication, or outdated product status.
The most common example is e-commerce retailers that require consumer packages that differ from regular open inventories. Examples include:
• Product Bundles
• Single Products
• Seasonal Packaging
SKU numbers are not universal. Each seller for a particular item will have a unique SKU. Most have their own supplier causing the sellers not to track the same number of items easily. Ideally, suppliers and retailers would use a universal product code UPC to make tracking and inventory management more easily controlled.
In the Material Handling Process
When storing a product in two warehouses, you need to create two storage units to make a more efficient inventory management system. Increasing the number of product names for a product category or product line increases the likelihood of errors happening as they grow. Not having a process to verify the correct product code has been selected increases your probability of mistakes in inventory levels.
If the generation of item codes is not controlled, this can significantly impact your ability to operate efficiently. This is where Russell Conveyor can come in and ensure that you operate as smoothly as possible. When sales improvements cannot offset impaired operational performance, the worst can happen. However, this is an area that can affect your operations’ overall quality and the company’s material handling system. Proactive measures such as monitoring the SKU codes can allow you to take the incremental corrective action required during your process.
We would strongly recommend exploring the technological solutions currently available that merge significant data sources with predictive analytics engines. This will help you understand the impact of SKU system distribution on sales, sales volume, and sales performance. We can use attributes-level data such as price, price-to-sales ratio, product type, color, size, etc., to determine the impact of different SKUs on the entire product portfolio. We can also analyze point of sale (POS) data as well.
The deepening of the analysis by constructing a questionnaire helps you refine and improve the decisions you make about individual SKUs. Analyzing attribute-level data can also help clarify each SKU’s impact on sales and help managers decide which variations from the distribution should be added or eliminated.
SKU’s and Inventory Management
Suppose you are concerned about the quantity of SKUs in your operation. A high-quality SKU analysis is needed to assess the impact of SKU spread on your ability to do business effectively. Understanding the trade-offs associated with the number of SKUs and product variants can provide managers with critical insights. These insights are essential to making the right decisions for the company.
The goal is not only to prevent the increase in the quantity of SKUs but also to regulate it
As stock levels expand, there should be enough space to add SKUs for added value but not impair the company’s ability to effectively run your business. By performing an SKU analysis, companies can better understand how it affects their business and its impact on sales, sales volume, and performance.
Although reducing inventory would be a loss, the phasing out of non-moving SKUs from inventory and the loss’s write-down can reduce storage rack space requirements. This inventory reduction will make the picking process more efficient and cost-effective.
Merging the S&OP product portfolio process with SKU – Level Economic Value Analysis and examining the relevant factors you are targeting is a much smarter and more considered way to manage your SKU portfolio. It’s an essential step in the right direction, but it’s only part of the solution. At Russell Conveyor, we can help you manage your SKU portfolio in a much smarter way.
While SKUs can help identify products, too many of them can lead to an overall complex business operation. This means you should have a strategy or method to remove slow-moving SKUs from your supply chain. While this is an essential part of a distributor’s overall business strategy, it can also create several problems that distributors need to consider.
Not only can we help your SKUs and inventory management, but we can also assist with any Material Handling Equipment needs you may have, from Simple conveyor systems to complex automation like AGVs and AMRs. We are here to help you begin filling your purchase orders quickly and efficiently.