Maximizing Profits Through SKU Rationalization

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A Comprehensive Guide to Product Lifecycle Management (PLM)

SKU rationalization is an essential part of product lifecycle management (PLM) and it can have a tremendous impact on the profitability of businesses. By analyzing, segmenting, and optimizing existing inventory and accurately anticipating new products, companies can ensure that their product portfolio is healthy and profitable. This blog post will provide a comprehensive guide to SKU rationalization, as well as how it fits into the larger scope of product lifecycle management.

What is SKU rationalization

SKU rationalization is the process of analyzing and segmenting existing inventory to identify trends in sales and profitability, understand how costs affect item profitability, and eliminate tail items that are not performing as desired. By doing this, businesses can make more informed decisions about their products and optimize their product portfolio to maximize profits.

Once a business has identified which products should be removed from the portfolio (or “phased out”), it is important that they consider any potential legal or brand-related implications of doing so. Additionally, product portfolios should be reviewed regularly to ensure that the portfolio remains healthy and competitive.

How SKU rationalization fits into product lifecycle management

Companies can use accurate forecasting tools to gain insight into new products and identify potential switching. This information can help them make more informed decisions about their SKUs and ensure that they are maximizing their potential. Additionally, businesses should collaborate with key stakeholders (such as marketing, sales, finance, etc.) to get their input on the portfolio optimization process.

Best Practices

Companies should make sure that they have the right data and relevant metrics in place, such as sales velocity and profitability of each product, before making any decisions. Additionally, they should take special care to account for any potential legal or brand-related implications of phasing out certain products.

SKU rationalization can be a powerful tool for businesses to use in order to optimize their product portfolio and maximize profits. By taking the time to analyze, segment, and optimize existing inventory and accurately anticipate new products, companies can make more informed decisions about their SKUs and ensure that they remain competitive in an ever-evolving marketplace. With the right data, collaboration with stakeholders, and understanding of costs and implications, businesses can create a healthy and profitable product portfolio that will help them remain successful in the long run.

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