SKU Rationalization.cdr

Inventory is one of the most significant investments in the retail sector. A $4.0B arts and craft specialty retailer may hold up to $0.9B of inventory while a $45B pharmacy retailer may invest as much as $8.5B in inventory. Therefore, in order to maximize the Return on Investment (ROI), every retailer should ensure that extraneous inventory investments are kept to the minimum. Facts confirm that up to 35-40% of the total inventory is stuck in the non-performing, slow moving Stock-keeping units (SKUs), whose cumulative contribution to sales is less than 5%. This phenomenon is known as the long tail of the supply chain. One of the ways to reduce these unnecessary inventory investments is to optimize the assortments. Based on one or more parameters such as sales, gross margins, space productivity and so on, the non-performing SKUs may be selected and subsequently " SKU Rationalization is an important technique in inventory management that helps retailers optimize their assortments by decommissioning some of the non-productive merchandise. " White Paper