Managing SKU Proliferation in eCommerce and Distribution
In a company dealing with SKU proliferation, the issues employees must face include how they will best leverage their supply chain, warehousing capacity and logistical operations. If you have the right systems in place and the work flow is well-managed, employees can effectively process high volumes of SKUs. Without the right systems and processes, however, SKU management and its associated workload become unmanageable. Additionally, executives need to be able to measure whether or not the carrying costs of handling and storing less popular products are worth their more limited sales. When considering SKU proliferation, what opportunities are there to make adjustments so that you get the most from your resources, processes and storage?
Opportunities for Managing SKU Proliferation
1. Forecast demand and make adjustments based on actual orders.
Solutions like Trek Cloud ERP can help you forecast demand and consolidate purchase orders to suppliers so that you can get the most out of your logistical operations. Managing your supply chain with ERP might also include an option to leverage your vendors to buy certain quantities that are stored in their warehouses rather than your own. By using blanket purchase orders, you can get a steady stream of product based on anticipated demand. Your system will help you with SKU management, including tracking the complexity of your products while keeping your customers happy and suppliers cooperative. A good supplier relationship results in being able to adjust your blanket purchase orders based on up-to-the-moment quantities in your ERP system.
2. Utilize LEAN processes that help you look for where you can eliminate waste.
This concept applies to both your stocked goods and staff resources. For example, if you go through 10,000 of a particular bolt per month, there’s no reason to have 500,000 of those bolts in the rack. To avoid having excess stock, you can utilize a Just In Time inventory methodology so that your stocked goods are closer to your actual needs, which lowers your carrying costs. This also improves cash flow. On the other hand, cutting your stock levels down too far results in higher numbers of expedited orders that include expedite fees and an inability for your procurement staff to negotiate pricing. It’s important to find the right balance for your business.
3. Consider improvements in your warehouses and distribution center that make SKU management easier.
This is an important topic we’ve addressed in a more general way with our article, 10 Distribution Center Best Practices to Implement. Here, we’d like to make a few points for you to consider as you think about SKU proliferation and SKU management:
- Use zones, bins and locators to help you automate and streamline the picking process as well as improve your ability to manage inventory counts. Consider the best types of warehouse storage racks, shelving and systems for maximizing space as part of your SKU management. Strategize what goes into the rack based on your volumes and an efficient picking process.
- Consider pulling based on a wave plan in order to better organize or sequence the picking process and make the most of your limited space and resources.
- Eliminate hazardous conditions that are created by lack of space. Is stock stored in the aisles or blocking exits? Is dead or stale inventory creating a safety hazard? Additionally, consider whether storage issues are creating inefficiency as your employees try to work in too tight conditions. What is the cost of SKU proliferation over the potential for sales? Is it time to discount certain goods so they can move out?
- Consider drop shipping. Develop relationships with vendors who can directly ship certain products to your customers on your behalf.
- Review your inventory turns and set a goal. Be realistic, as it does take time to begin to improve your numbers and you’ll likely do some fine-tuning along the way.
- If you have too much slow moving stock, consider using discounts, clearance, scratch and dent sales, garage sales, bargain caves and other special events to move out older or obsolete inventory.
Need Help with SKU Management and SKU Proliferation?
If SKU proliferation is a reality for your business, having the right software to manage your inventory and processes is important. Just as important is having the right consulting team who can help you implement best practice methods that result in lower overhead costs and improved cash flow. Trek Global’s team of consultants and business analysts can help you implement the right processes and software for effectively managing SKU proliferation in eCommerce and Distribution. Ready to get more out of your limited spaces and resources? Contact us today! We’d be glad to discuss SKU management options that will take your business to the next level.