The interest in managing SKU proliferation—rationalization and often cutting SKUs—has peaks and valleys, often in sync with the economy. During down times companies seek to cut costs. But today’s story is different. New geographies, new channels, and new customer segments mean lots more products. “Gone are the days when our ‘A’ products accounted for all the profits,” one executive told us. Customers want unique products that enhance their brand and sales. And consumers have access to so much choice; you don’t want to lose them to your competitor.
In addition, there are many manufacturing and wholesale distribution mergers of late. As a result, these companies face the challenge of evaluating and rationalizing their newly combined product portfolios.
Yes, today’s market is a complex multi-channel, multi-market world where companies are exploring and entering new markets like never before. Unfettered by limited access to new customer opportunities, they can design and sell products all over the world. But channel diffusion also impacts the cost of managing all that choice. Facility capacity, inventory, catalogues, unique web pages, promotions, and administrative process and data management costs impact margins. The challenge becomes, then, how to profitably manage the many product options that might result from these quite complex opportunities.