How can you use SKU rationalization to optimize demand supply planning for e-commerce?

SKU rationalization optimizes e-commerce demand-supply planning by analyzing SKU data, segmenting products, prioritizing based on sales volume and profitability, adjusting inventory levels seasonally, nurturing supplier relationships, aligning with customer demand, evaluating costs, introducing new products strategically, leveraging technology, and continuously monitoring and adjusting strategies for enhanced efficiency and profitability.

Keeping on top of your SKU range is crucial to remain competitive and profitable. In my experience, for most ecom businesses the 80/20 rule applies. 80% of your income comes from 20% of your range. Seasonality and trends will shift your range. Most importantly, you don't want to run out of stock on top selling items. Further, you need to analyze your unit costs carefully, identifying profitable items in your catalogue where you have the advantage over others. The best SKUs are often items where you can sell at retail price because you are the only seller that holds stock. There are great platforms and tools (i.e. Rithum) that help you to auto-reprice at the most profitable price or predict when to restock.

Comece identificando os critérios que você usará para avaliar o desempenho de cada SKU. Isso pode incluir métricas como volume de vendas, margem de lucro, frequência de vendas, estoque obsoleto, entre outros.

Variety attracts customers, but too many SKUs bloat costs. SKU rationalization is the key: Here's how: Analyze Data: Dive into sales, profitability, & inventory turnover to identify star performers and duds. Segment & Prioritize: Group products by category, brand, etc. Prioritize based on their contribution to your goals. Forecast Demand: Use data and trends to predict future sales for key SKUs, ensuring you have the right stock at the right time. Optimize Inventory: Ditch slow sellers, consolidate similar items, and adjust levels seasonally to free up cash and space. Stronger Supplier Relationships: Focus on suppliers for prioritized SKUs, negotiating better deals and lead times. Streamline your product mix for an accurate forecast.

Before looking at sku rationalisation it’s wise to ensure you have a customer facing product hierarchy to map your history against. This allows you to create a category strategy for sales, margin, cost, units, acp etc. When this is done you can start to rationalise sku productivity within each category based on the category limitations. This is the best starting place for sure.

Utilize dados de vendas e análises para avaliar o desempenho de cada SKU com base nos critérios estabelecidos. Identifique os produtos que estão contribuindo positivamente para seus objetivos de negócios e aqueles que não estão alcançando as metas estabelecidas.

Always be analyzing SKU level performance on a daily basis looking at MoM and YoY trends. Always keep an eye on problem SKUs that are either getting little to no sales or are getting a lot of sale but with very little margin. Both of these scenarios are not good for your cash flow and require attention.

Analyzing SKU performance is like dissecting the heartbeat of your E-commerce business. Look beyond just sales figures; delve into metrics like customer reviews, return rates, and market trends. This holistic approach helps identify underperforming products, optimize marketing strategies, and refine inventory management. By understanding the nuances of each SKU, you can make informed decisions to drive growth and profitability.

Dig into sales, inventory, and web analytics data - don't rely just on hunches. Use systematic criteria for keeping or cutting SKUs, not history. Tail contributes too. Revisit analysis regularly as consumer trends change. Segment users - some niche SKUs have loyal followers. Test tweaks before cutting. The goal isn't just simplifying but optimizing long-term revenue. So, take a rigorous, data-driven approach to SKU assessment.

Has a data-lake is crucial to consolidate and understand all the SKU behavior and gather all information to show in a dashboard. A data science can handle all the information and give to the retailer all the infos needed to best decide the pool of SKUs to be keep in the inventory

Com base na análise do desempenho, tome decisões informadas sobre quais SKUs manter, modificar ou eliminar do seu catálogo. Isso pode envolver a descontinuação de produtos com baixo desempenho, ajustes de preço ou promoções para impulsionar as vendas de SKUs com potencial subutilizado e a manutenção de SKUs que são consistentemente fortes.

For portfolios with a large number of SKUs it is not uncommon to see what could be a strong business get drug down by poor performing SKUs losing money. In other words pull back from what is not working and focus on what is! I like to break down portfolios into 3 different buckets. 💰 Hot selling products making strong margins - Focus 80% of your attention on what is working. Add variations to these high performing products and optimize your content with A/B testing! 🚀 Products that are on the fence - Do all the "things" for these products! Work on improving images, content, PPC, etc... 🚩 Products where you have tried everything and make no money/no sales - Cut these immediately and do what is needed to get rid of the inventory.

Deciding which SKUs to keep, modify, or eliminate is akin to pruning a garden for optimal growth. Evaluate each product's contribution to overall profitability, customer satisfaction, and market demand. Embrace flexibility; adapt to changing consumer preferences and market dynamics. By regularly reassessing your SKU lineup, you can streamline operations, reduce costs, and focus resources on the products that truly drive success.

The single biggest factor in SKU rationalisation SKU selection is determination of that SKU’s direct or indirect influence on e-commerce performance. Direct ones are easy: they clearly drive more revenue than acquisition cost so are vital to profitability. However the indirect ones are harder identify. These are SKUs that might not be profitable but are gateways to a customer buying more profitable products. Often tech products that have negative Ebitda can lead to purchases of home furniture which has bigger margins. So when cutting, look at direct and indirect influence.

Analyze each SKU and decide: keep the profitable, popular winners core to customer value; tweak middling SKUs with potential through updates; cut unprofitable losers wasting resources. Importantly, continually review kept SKUs and measure rationalization's impact on revenue, costs, customer metrics. Rationalization should be an ongoing process, not a one-off. Have clear decision criteria on what stays, goes, or gets improved. By measuring outcomes, refine the process over time.

In that area I believe that A.I can make a huge impact! In the short-term A.I can provide insights in a real-time about your S&OP, about price elasticity, or even give accurate forecast to buyers.

SKU rationalization can empower e-commerce businesses to better structure their SKU data and maximize their ability to make rapid predictions for future forecasting and restocking decisions. By layering on technology such as artificial intelligence (AI), you can ensure that your entire stock file is optimized for the most accurate predictions that allow you to then ensure you have the right stock, in the right place, at the right time.

Implemente as decisões tomadas em relação à racionalização de SKU e monitore de perto os impactos. Acompanhe as mudanças no desempenho de vendas, margens de lucro, níveis de estoque e feedback dos clientes para garantir que suas ações estejam alinhadas com os objetivos comerciais.

Implemente seu plano de racionalização de SKU comunicando-se com todas as partes interessadas e atualizando sistemas relevantes. Monitore impactos em estoque, custos, receitas e satisfação do cliente. Reavalie periodicamente para ajustar às mudanças do mercado e manter seu portfólio de produtos alinhado com as necessidades dos clientes e objetivos de negócio.

Rolling out rationalization requires communication - employees, suppliers, and even customers may need a heads-up on changes. Update inventory systems, order processes, and marketing collateral impacted. Closely track effects on demand planning. With fewer SKUs, do you achieve smoother inventory flows and service levels? Or lose sales from dropped niche items? Tune as learnings emerge. Also, customer tastes change, so revisit the SKU mix every 6-12 months to catch new winners or laggards. Rationalization shouldn't be a fixed perfect state but an ongoing optimization lever based on closely monitoring what customers want and how operations perform.

Além da análise de desempenho atual, leve em consideração tendências sazonais, mudanças nas preferências dos consumidores e o potencial de novos produtos ao revisar sua lista de SKUs. Esteja preparado para ajustar suas estratégias de racionalização de SKU conforme o mercado evolui. Considere o uso de ferramentas de automação e análise de dados para facilitar o processo de racionalização de SKU e fornecer insights mais detalhados sobre o desempenho do produto. Mantenha uma comunicação aberta com fornecedores e parceiros para garantir uma transição suave ao descontinuar SKUs e para explorar novas oportunidades de produtos que atendam melhor às necessidades do mercado.

Corporate policy needs to be well defined (and often isn't) Maybe it's a 1 for 1 where if the brand wants to add a new SKU, there needs to be 1 eliminated. Maybe that's harsh but SKU proliferation adds costs, and complexities that not everyone understands. Take the time to do it right. Start small and develop a working policy that everyone involved understands and can support. Even if there is some arm twisting involved! Good luck!

SKU rationalization isn't a set-it-and-forget-it project but an ongoing process. Markets and shopper interests change. New products get launched. Keeping a pulse on emerging trends, which SKUs gather steam, and which lose traction is important. Don't let the portfolio remain static for too long. Revisit it at least annually. And approach it holistically - how do merchandising, marketing, operations need to adjust together to make the revised mix succeed? The goal isn't just cost savings but better aligning what customers want with operations. Do that well and it's a win-win. But it requires actively managing SKUs based on performance, not just inheriting what history dictates.

Depending on your industry and/or reason for deprecating a SKU, you might still need to support your customers who purchased the SKU earlier. - You might continue to get support inquiries or service requests related to those SKUs. - You might need to honor warranties on those SKUs. - You might get returns on those SKUs. - Your customers might be interested in a re-purchase and want an easy way to identify a substitute for that SKU. Hence, when considering SKU rationalization, you should also analyze and plan for the impacted customer experiences.

It's essential to highlight that turn optimization plays a pivotal role in this context, especially considering the capital costs associated with sitting inventory, not to mention storage fees and the potential loss of revenue opportunities when resources are allocated to underperforming SKUS. A strategic approach to turn optimization would involve regularly analyzing sales data to identify low-turn SKUS and assessing their profitability. This analysis should be complemented by market trends to forecast demand more accurately. Furthermore, leveraging technology to improve inventory visibility can help businesses make more informed decisions about which SKUS to phase out, keep, or promote.