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Why Inventory Management with High SKU Counts is a Ticking Time Bomb

Is your inventory a ticking time bomb, ready to explode costs and complexities at any moment?

Many hail diverse SKU portfolios as the epitome of catering to every customer whim. Yet, the more SKUs you add, the closer you might be to detonating an inventory management crisis.

Inventory Challenges with High SKU Counts:

Every SKU represents a promise to customers that you have what they want, when they want it. But each added SKU brings its own set of challenges:

  • Risk of Stock-outs: As you juggle more product variants, forecasting each SKU's demand becomes an intricate puzzle. Miscalculate, and you risk running out of stock, damaging customer trust and sales.

  • Overstocking and Associated Holding Costs: The flip side? Overestimating demand and ending up with a warehouse full of products gathering dust. This leads to increased holding costs and potential obsolescence.

  • Complexity in Demand Forecasting: High SKU counts mean more data points to consider, more trends to analyze, and more potential for error. The complexity can make accurate demand forecasting nearly unattainable.

The Inventory Sweet Spot:

Having fewer SKUs doesn't mean compromising on customer satisfaction. It's about finding that inventory sweet spot:

  • Simplified Inventory Management: Reducing SKUs can mean a clearer view of stock levels, easier reordering processes, and reduced manual interventions.

  • Just-in-time Inventory with Fewer SKUs: By honing in on core products, you can implement a just-in-time inventory system, reducing storage costs and ensuring products are as fresh as possible.

Tips for SKU Rationalization:

Taking control of your SKU count is crucial, and here's how you can start:

  • Data-Driven Decisions: Use sales data, customer feedback, and market trends to identify underperforming SKUs. Consider phasing them out or consolidating similar products.

  • Regular SKU Audits: Make it a practice to evaluate your SKU portfolio regularly. It'll help keep your inventory lean, relevant, and manageable.

  • Stay Customer-Centric: Ensure that any changes made to the SKU count align with customer needs and preferences. Always prioritize delivering value.

While the allure of offering a multitude of options is tempting, it's essential to recognize the inherent dangers of an unchecked SKU count. As you aim to provide value and variety, ensure your inventory management doesn't become collateral damage in the process.

Let your CPQ system create the combination to meet the market needs, and let the SKU count stay low for all the reasons above.

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