Value Chain Report -- Cats & Dogs: Objective Approaches To SKU Rationalization (Part 1)
- Topics:
- Inventory Management
- Tags:
- Channel Management,
- Value Chain,
- SKU,
- Rationalization,
- Performance Management,
- Penton Media Inc.,
- Marketing,
- Human Resources,
- Cost,
- Workforce Management
- Source:
- Penton Media
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Overview: The article is about two-dimension inventory-efficiency model analysis. At its core, the two-dimension inventory efficiency technique is an analysis of usage value and order frequency applied to the product mix to determine current inventory investment vs. fill rate performance. It explains SKU, if the firm is like most, it is much easier to add a new SKU (stock-keeping unit) into the product line than to drop one. Most firms do not have an objective process for ongoing SKU rationalization. Frequently, inventory investment and associated carrying costs are some of the measures used to evaluate SKU performance, along with other factors, many of which are subjective. However, beyond just the costs associated with inventories of under performing SKUs, there are many hidden costs that should be considered in evaluating the true economic value in retaining the item as an actively supported product. These hidden costs include expenses associated with maintaining data files, physical and/or online catalogs, engineering drawings, revision levels, purchasing records, cycle counts and so on, which should be (but typically are not) considered in the calculation of carrying costs.
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Format: HTML | Date: Oct 2002 | Pages: 1
