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:
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Purchasing SKUs with different packaging from various vendors
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Absence of proper validation with regards to the parts’ details prior to the release in market both by OEM and private brands
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Business acquisition’s possession of SKUs
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Sales & Marketing’s integration of SKUs as per customers’ requests without proper assessment
SKU proliferation may result to unfavorable effects such as:
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Skyrocketing of supplier’s manufacturing cost due to frequent setups and short production runs
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Difficulties in forecasting sales volume which consequently increase inventory and transportation costs
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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:
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Create a possible cut list together with cross-functional departments
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Formulate a reduction ranking list
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Administer engineering verification and analysis to assess the reduction’s effects
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Craft an implementation strategy to consolidate extra SKUs
Below are the benefits of SKU consolidation:
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Driving down of unit cost due to cut down of changeovers
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Better cash flow due to inventory reduction
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Minimized cost of labor, packaging materials, and warehousing space