Use the import module to reuse application information in files from other tools or architecture products. The challenge freight costs significant as a proportion of total cost of procurement freight costs are highly variable among suppliers, packaging presentation, and shipping routes goals is to achieve lower shipping costs as a proportion of total order value. Role of forecast analytics in inventory management ism chapter napm denver seminar. Improving performance with sku analysis 2 the key metrics for a sku analysis are. Use the pareto principle for effective sku rationalization. For information about the global survey of expectations and experiences with. Harnessing advanced analytics to optimize sku management. Sku optimizationreformat microsoft download center. Count on customerfocused cutbacks all this aside, the most trying reason why retailers find sku rationalization so difficult is the inherent element of customer retention.
Though productlevel value is crucial when a company undertakes a sku rationalization exercise to determine which skus to keep, delete or reprice, it views each product in a vacuum, independent. Do you want to understand your supply chain costs, tune up your prices and programs, and build your bottom line. Sku rationalization a technique for inventory optimization. But all retailers can benefit from going through the process to evaluate the performance of their products and stores. Inventory optimization using smartops case study from. Sku rationalizationproduct line optimization product line optimization case study pdf do you want to understand your supply chain costs, tune up your prices and programs, and build your bottom line. Category healthy will generate a comparable cumulative gross margin after rationalization as before but will be less costly to handle. Sku catalog rationalization next generation technology end user demand engineering changing the organizations boundaries vendor led tco innovation smart forecasting and planning vendor consortia buying minimizing transaction costs buying for vendors procurement outsourcing logistics optimization transport mileage reduction. The sku rationalization process has become a definite trend across. Sku rationalization can help reduce the aggregate cost to shelf of a category, thus increasing retailers net profits. Jan, 2016 tracking enduser purchasing activity can simplify sku rationalization. Sku, pricing, mix, and placement rationalization 97 5. This report will delve into examples of strategies that have worked, and some that havent.
X category sku rationalization is critical in order to reduce visual and physical clutter continually upgrade your consumer insights to keep track of emerging consumer trends consult front end focus for current and future immediate consumption trends temporary displays in front of the check stand endcaps do not drive incremental sales. This product rationalization checklist will be very helpful to all business owners and managers who need to analyze and revise nomenclature of goods and services they provide, so all unprofitable items can be accurately identified and taken out from the sales, inventory or manufacturing. Eindhoven university of technology master managing. Efficient product rationalization within a single product. Sku rationalization 7 tried and tested methods you can try. If a sku is not profitable for a company, its a clear candidate for elimination. That really opened my eyes to why a company should jump in and perform sku rationalization. Thank for taking the time reading my blog on how to compile a list of applications for rationalization or software application portfolio. Were constant wrestling with this issue, but can never seem to get it right. In short term, sku rationalization is a cost driver of write off. When to use sku rationalization notwithstanding retailers addiction to determining assortment based on trade funds and slotting fees, there are a number of highly opportunistic situations in which a manufacturer is well advised to undertake a sku rationalization exercise. Product proliferation is a problem seen in many large consumer packaged goods cpg companies. Business management improvement bmi dave tuckwiller director, ams, cps.
Sku, stock keeping unit, a code number, generally utilized as a machinereadable universal product code, appointed to a single product of stock. May 15, 20 one approach to effectively manage the product portfolio is stock keeping unit sku rationalization or product rationalization. Nov 20, 20 next time on application rationalization. Sku rationalization as part of an item lifecycle management process retailers should implement sku rationalization only as an element of an overall item lifecycle management approach as a means to effectively deliver positive financial results to the company. Ebitda in the quarter strong underlying market trends in nonresidential construction spending additional pricing actions announced in. In the past extending the range has been a sure fire way to increase sales.
Market basket analyzer evaluates each sku, not just based on its own sales and. With a proper strategy, this process can be both beneficial for you as well as your customers. Sku rationalization adjust assortment strategy markdown optimization disposition continuous products. Sku rationalization may be a popular buzzword, but it is not something to be taken lightly. Our sku rationalization projects always end up as sku justification projects. Sku rationalization is not a silver bullet, but can help to improve merchandising, reduce outofstocks, cut excess inventory and improve the bottom line for retailers. Making the case for inventory optimization deloitte. Findings at unilever illustrate why sku rationalization. The value of sku rationalization in practice the pooling effect. New products specification updates looking ahead laura walter, commodity procurement rick peterson, specialty crop inspection. Application rationalization approach tool how compile a list. Sep 18, 2017 sku rationalization can be implemented a few different ways.
Findings at unilever illustrate why sku rationalization can. Harnessing advanced analytics to optimize sku management in. Please send me an email to request copies of papers not available as links to pdf files online due to reasons. For information about the global survey of expectations and experiences with iso 9000 and iso 14000, click here. Elimination of a sku or multiple skus does not include potential production line savings, as it appropriate to assume that production of other skus will increase. Jul 04, 20 similar product categories were combined to reduce waste. How to perform a sku rationalization analysis quora. As part of a system for stock control, the sku represents the tiniest unit of an item that can be offered from stock, bought, or. Considerations when rationalizing your product portfolio while product rationalization is an integral component of product life cycle management, it is often neglected because it involves change and can cause ripples throughout the organization. In the thesis, a complexity reduction exercise through sku rationalization is conducted in cooperation with the kraft heinz. Optimized multiechelon sku inventory location policies. Sku rationalization as part of a product lifecycle management process. Some savings or opportunities, such as elimination of a flavourchange, can be realized without necessarily eliminating the sku.
More often though, a company has saddled itself with more skus than it really needs, tying up capital and slowing down operations. Without proper assessment of the product portfolio, companies can easily run into the danger of adding products that only result in reducing profits. Application rationalization is an ongoing, critical part of it portfolio management, and is a cyclical process, as shown in figure 1. One of the most commons ways is to eliminate skus by focusing on profitability. Sku rationalization can help both reduce required capital and lower operating costs. This approach serves as a means to effectively deliver positive financial results to the company while establishing the clear project boundary which is key to its success. Product manufacturers, wholesalers and distributors typically track product velocity in terms of raw turns and monitor other financial and balanced scorecard measures. The first thing done with dragon1 in application rationalization is often reusing available information on architecture products by importing files, like powerpoint, excelsheets or exports from cmdb tools or other architecture tools. Standardization will allow pmi to meet countries needs and demands with greater efficiency and value for money. There are exceptional times when you have no choice but to put ketchup in the cooler. Request pdf the value of sku rationalization in practice the pooling effect under suboptimal inventory policies and nonnormal demand. Alarm rationalization is a systematic work process to evaluate all potential or existing alarms against principles established in an alarm philosophy document, to qualify which are legitimate alarms, to specify their design, and to capture rationale such as. Effectively managing the supply chain when the product portfolio is constantly growing is a complex task for management. His major areas of interest are sociological theory, globalization, and the sociology of consumption.
Sku rationalization using multiple criteria inventory classification. All of my current research falls within one or more of the topic areas below. Sku rationalization can be implemented a few different ways. Analysis revealed net preference does not impact net use, having access to a net is key. Bmi process interviews and documentation of pain points validate vision. Sku rationalization sku profitability analysis with gmroi. The companys sku portfolio reduced by 15% and waste reduced by 20%. A comprehensive approach to application portfolio rationalization cognizant 2020 insights executive summary ongoing economic uncertainty is imposing stringent cost pressures on organizations across industries. Sku rationalization can be implemented sku as an element of products overall lifecycle management.
Assess each performance segment create p rl m y recommendations 2. Conducted a landscape analysis and sku rationalization. An integrated approach to application portfolio rationalization. As a result, its stock holdings and the complexity of its product portfolio reduced, which in turn. When the sku category is assigned at the end of this analysis, we will use a composite ranking of both units sold per store and growth to identify the best skus.
Inventory optimization using smartops case study from teknokret. The following list provides key considerations for retailers when planning for sku rationalization. I hope ive inspired you by making a start yourself. Sku rationalization a technique for inventory optimization in the retail sector. For most companies, complexity or sku reduction initiatives still start and stop with transactional data, focusing on turnover, profit, and volume by customer and channel. The concept of less is more is a bit of a paradigm shift for many retailers. Slow moving skus low volume sales high return rate due to defects when less is more segmentation analysis segmentation analysis execution after building the matrix follwing key points are to be considered for analysis market basket. What is recognized to a lesser extent, regardless of. The very first impulse to rationalize portfolio usually comes internally from controlling or financial department, whi. Sku rationalization monitoring trendsproducts volumes when and how to retire products low volumes analyze why updating package sizes. These operations serve an invaluable service to these enterprises, but if one had to put a number on it, supply chain digest. Review historical class performance 5step approach to optimizing assortment, with. Review optimization assessment and ma ke d ci s on o items 3. My next blog will be about the dashboard for application rationalization in the dragon1 ea tool.
A straightforward approach to this is a clear cut line of volume needed in order to justify. From the retailers point of view, sku rationalization should result in the highest satisfaction and maximum shopping basket across the breadth of its. The pareto principle, or the 8020 rule, can help retailers make the most of sku rationalization initiatives. At best, the process uses backwardslooking data in an attempt to create the optimal forwardlooking shopping environment. Sku rationalization savings through volume aggregation sourcing optimization working capital optimization derived benefits from manufacturing efficiencies and sku rationalization improved cycle times to drive inventory reductions manufacturing efficiency lean manufacturing focus throughput flexibility labor pool management. Heres how to create a holistic view of complexity reduction that includes brand demand view and complexity rating. Increase collaboration between ams and fnsfdd in preparation for. Calculation of complexity costs an approach for rationalizing a. A comprehensive approach to application portfolio rationalization. Sku rationalizationproduct line optimization franklin. Inventory is one of the most significant investments in the retail sector. Fewer skus lead to fewer inventory stocking requirements.
The weberian theory of rationalization and the mcdonaldization of contemporary society george ritzer george ritzeris distinguished professor of sociology at the university of maryland. In response, many businesses are prioritizing their investments to drive operational effi. Sku rationalization improved the companys overall profitability and convinced the commercial team that sku rationalization is the optimal approach to enhance profitability. Corbett university of navarra, faculty of economics and business administration, campus. Slow moving sku s low volume sales high return rate due to defects when less is more segmentation analysis segmentation analysis execution after building the matrix follwing key points are to be considered for analysis market basket. To improve customer service, reduce cogs and deliver shareholder value, enterprises need a wellplanned and executed application portfolio.
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