Product Lifecycle Management (PLM)
SKU rationalization is an essential part of product lifecycle management (PLM), with a significant impact on profitability. By analyzing, segmenting, and optimizing inventory and accurately forecasting for new products, companies can ensure a healthy and profitable product portfolio. This guide provides an overview of SKU rationalization and its role in product lifecycle management.
What is SKU Rationalization?
SKU rationalization is the process of analyzing and segmenting inventory to identify trends in sales and profitability, understand cost impacts, and phase out low-performing items. This analysis allows businesses to optimize their product portfolio and maximize profits.
When deciding which products to remove (or “phase out”), businesses should consider legal or brand implications. Regular portfolio reviews are essential to maintain a healthy and competitive lineup.
SKU Rationalization versus Product Lifecycle Management
Accurate forecasting helps companies make informed decisions about their SKUs, supporting better product lifecycle management. Collaborating with stakeholders like marketing, sales, and finance ensures a comprehensive approach to portfolio optimization.
Best Practices
Ensure relevant data and metrics—such as sales velocity and product profitability—are in place before making decisions. Consider potential legal or brand implications of phasing out products.
SKU rationalization is a powerful tool to optimize the product portfolio, allowing businesses to stay competitive. By analyzing, segmenting, and accurately forecasting for new products, companies can build a profitable portfolio that supports long-term success.
