BY ART VAN BODEGRAVEN AND
KENNETH B. ACKERMAN
basictraining
winning the losing battle of SKU proliferation
LIKE IT OR NOT, SKU PROLIFERATION IS A PERmanent fact of modern business life. We’ve known for
a long time that it stresses supply chain operations and
planning—sometimes beyond reason. The real issue is
not how to stop it, but how to deal with it—
proactively and efficiently.
In the early days, when supply chain concepts were
just being discovered, activists seized on the phenomenon of SKU proliferation as a critical point of attack
in making supply chains more responsive and effective. We all “knew” that the model of continuous
expansion did not make real sense in satisfying consumer desires and was not ultimately sustainable.
Think things have improved in that arena over the
past 15 or 20 years? Of course they haven’t. Consider
what’s happened with tooth brushing, for example.
Where once our choices were limited to soft-, medi-um-, or stiff-bristled toothbrushes and a handful of
toothpaste brands, today dental care products command their own mini-aisle in the supermarket.
Too much of a good thing?
Marketers may look upon those new flavors, scents,
colors, packages, and sizes as job security. But to logisticians and supply chain managers, it’s unfettered SKU
proliferation. And we all know how dangerous that
can be, don’t we? Consider just a few of the supply
chain complications expanding SKUs create:
1. They clog the supply chain. Too many items, too
nearly the same. Too much item master maintenance,
too many product life cycles to manage.
2. They cannibalize the movement and positioning
of the “good” SKUs, turning “A” items into “Bs,” turning “Bs” into “Cs,” creating more “Ds.” Where to locate
things in the DC? What deserves to be in the “golden
zones”? Who knows what’s hot and what’s not?
3. They force smaller orders for a greater variety of
products.
4. They increase total inventories, eating up capital
and space.
5. They change the storage and shipment mix. They
often have different cube/weight profiles than the
“normal” SKUs. That affects trailer loading, pick
ergonomics, material handling parameters, specific
rack suitability, and who knows what else.
6. They can compromise or degrade material han-
dling system performance.
7. They take up space that could be used more effectively with fewer, better SKUs. And they use up pick
faces, a critical commodity in effective fulfillment.
There’s a lot more we could add, probably an almost
endless list. One well-known observer has gone so far as
to proclaim that SKU proliferation is “wreaking havoc”
on the economy. To the extent that there is any pressure
these days to reduce SKU counts, it seems to be coming
from the big box retailers, which generated much of the
proliferation themselves.
Failure to communicate
Yet for all the warnings
about the dangers of SKU
proliferation, you don’t see
many companies backing
away from the practice. If
anything, the trend seems
to be accelerating. And not
just among manufacturers
that feel compelled to
churn out “new” products
to keep up with their rivals.
We can point to a number
of companies that have successfully competed on the
basis of their vast inventories, using their unmatched
selection to wallop the competition.
These are not companies that are indulging in
mindless proliferation, but rather ones that are using
controlled proliferation to support strategic direction.
And they’ve avoided the common supply chain execution problems by bringing their supply chain people
into the planning from the start. In other words,
they’re setting a place at the planning table for everyone ultimately involved with fulfilling orders.
That might sound obvious, but the fact is, companies frequently fail to consult with their supply chain
people about the planned introduction of new SKUs.
Too often, the warehouse only learns about new SKUs
when they begin to arrive. How many there might be
and their attributes may not be discovered until
they’ve all been received.
