SKU Proliferation refers to the rapid increase in the number of distinct Stock Keeping Units (SKUs) within a business’s inventory. While it may open doors to target niche customer segments and diversify product offerings, this expansion also brings with it increased complexity in inventory management.
Understanding SKU Proliferation
SKU Proliferation usually occurs when businesses expand their product range to cater to a more diverse customer base. This could be through offering multiple colors, sizes, or flavors of a product, among other variations. While on one hand, this expansion can boost sales and customer engagement, on the other hand, it can put a strain on inventory management and increase operational costs.
Impact on Inventory Management
One of the most challenging consequences of SKU Proliferation is its effect on inventory management. A high number of SKUs can lead to:
- Increased Holding Costs
- More Complex Demand Forecasting
- Higher Likelihood of Stockouts or Overstocking
Companies can adopt advanced inventory management systems and analytics tools to mitigate the challenges posed by SKU proliferation. These technological solutions enable efficient tracking and forecasting of multiple SKUs, facilitating optimized inventory levels.
Practical Tips for Managing SKU Proliferation
- Regular Review: Periodically assess the performance of each SKU. Discontinue those that do not meet a predetermined performance criterion.
- Data-Driven Forecasting: Use data analytics to predict demand for each SKU more accurately.
- Cost-Benefit Analysis: Prioritize SKUs based on their profitability and the resources required for their management.
While SKU Proliferation can lead to business growth and customer satisfaction, it also brings its own set of challenges, especially in inventory management. By adopting robust inventory management systems and strategies, companies can navigate the complexities effectively.
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