Decisions + Analysis
SKU Rationalization

Proliferation of available SKUs can lead to real cost and profitability challenges for your organization. For some industries, introducing and retiring SKUs is a constant activity, driven by changing customer demand, while others have more control over the frequency of SKU changes. Rationalizing your product portfolio – an essential activity that has a significant effect on your profits and drives manufacturing, sourcing, and pricing decisions – is all about balance. Determining the right variety of products requires coordination, information, and agreement between operations, sales and marketing, and product management.

Changes to available SKUs can alter customer behavior, service and support activities, and customer and product profitability. Leveraging ImpactECS to reduce SKU proliferation and analyze and compare SKU cost and profit performance arms you with the information required to decide which products to change, add, maintain, or retire from your portfolio.

Make SKU availability decisions with insights from ImpactECS

  • Evaluate margin performance by SKU: Calculate gross margin per unit using detailed SKU-level product, overhead, and post-sales cost data
  • Optimize product portfolios: Combine sales, operations, and manufacturing data to determine profit impact of product availability and proposed product offerings
  • Improve cost performance: Simplify product lines to reduce inventory costs, improve forecasts, and reduce or eliminate suppliers, equipment, workers, and storage space
  • Evaluate SKU availability scenarios: Adjust demand, production, or supply attributes to determine customer, product, and overall profitability
  • Focus on what matters: Identify the 20-50% of your strategic products or services that create value, and work to eliminate the offerings that detract from your overall profit performance
  • Nurture customer relationships: Understand customer requirements, create transparency, and guide behaviors to create win-win opportunities

Creating a Cost-Focused Culture

Manufacturers all have one thing in common – the need for an effective product costing process that delivers accurate and actionable results. Best-in-class finance teams are catapulting costing and cost transparency to the front of the list of strategic initiatives to transform their leaders’ ability to make decisions. If you’re struggling with the lack of ERP costing capabilities or overwhelmed with spreadsheets, you’ll find value in hearing how leading manufacturing companies have established robust product costing processes.

Check out this discussion around the three focus areas for product costing – Highlighting the benefits of a strong costing culture, the role of costing as a competitive advantage when identifying opportunities and enabling strategies, and starting on the path to better costing by defining the rules, tools, and data involved.

Resources

It Starts with Costs

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Get Quick Insights and Best Practices

Watch the CostTalk Minute Series >

Using Product Costing to Guide Key Business Decisions

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Is Your Product Costing Process Healthy?

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Role of Cost Systems in the Age of Digital Transformation

Watch the Discussion >

Daily News for Finance Leaders

Read The Ledger >

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