Cost Reduction

In the aftermarket industry, SKU proliferation is major issue since it negatively affects the efficiency of the manufacturing and supply chain.

This issue is caused by the following:

  1. Purchasing SKUs with different packaging from various vendors

  2. Absence of proper validation with regards to the parts’ details prior to the release in market both by OEM and private brands

  3. Business acquisition’s possession of SKUs

  4. Sales & Marketing’s integration of SKUs as per customers’ requests without proper assessment

SKU proliferation may result to unfavorable effects such as:

  1. Skyrocketing of supplier’s manufacturing cost due to frequent setups and short production runs

  2. Difficulties in forecasting sales volume which consequently increase inventory and transportation costs

  3. Loss of buying leverage and driving up of prices for material costs due to supplier fragmentation

We offer the following expertly-recommended engineering solutions to resolve SKU proliferation:  

  1. Create a possible cut list together with cross-functional departments

  2. Formulate a reduction ranking list

  3. Administer engineering verification and analysis to assess the reduction’s effects

  4. Craft an implementation strategy to consolidate extra SKUs

Below are the benefits of SKU consolidation:

  1. Driving down of unit cost due to cut down of changeovers

  2. Better cash flow due to inventory reduction

  3. Minimized cost of labor, packaging materials, and warehousing space