winning the losing battle of SKU proliferation

Like it or not, SKU proliferation is a permanent fact of modern business life. We've known for a long time that it stresses supply chain operations and planning—sometimes beyond reason. The real issue is not how to stop it, but how to deal with it—proactively and efficiently.

In the early days, when supply chain concepts were just being discovered, activists seized on the phenomenon of SKU proliferation as a critical point of attack in making supply chains more responsive and effective. We all "knew" that the model of continuous expansion did not make real sense in satisfying consumer desires and was not ultimately sustainable.

Think things have improved in that arena over the past 15 or 20 years? Of course they haven't. Consider what's happened with tooth brushing, for example. Where once our choices were limited to soft-, medium-, or stiff-bristled toothbrushes and a handful of toothpaste brands, today dental care products command their own mini-aisle in the supermarket.

Too much of a good thing?
Marketers may look upon those new flavors, scents, colors, packages, and sizes as job security. But to logisticians and supply chain managers, it's unfettered SKU proliferation. And we all know how dangerous unfettered SKU proliferation can be, don't we? Consider just a few of the supply chain complications expanding SKUs create:

1. They clog the supply chain. Too many items, too nearly the same. Too much item master maintenance, too many product life cycles to manage.
2. They cannibalize the movement and positioning of the "good" SKUs, turning "A" items into "Bs," turning "Bs" into "Cs," creating more "Ds." Where to locate things in the DC? What deserves to be in the "golden zones"? Who knows what's hot and what's not?
3. They force smaller orders for a greater variety of products.
4. They increase total inventories, eating up capital and space.
5. They change the storage and shipment mix. They often have different cube/weight profiles than the "normal" SKUs. That affects trailer loading, pick ergonomics, material handling parameters, specific rack suitability, and who knows what else.
6. They can compromise or degrade material handling system performance.
7. They take up space that could be used more effectively with fewer, better SKUs. And they use up pick faces, a critical commodity in effective fulfillment.

There's a lot more we could add, probably an almost endless list. One well-known observer has gone so far as to proclaim that SKU proliferation is "wreaking havoc" on the economy. To the extent that there is any pressure these days to reduce SKU counts, it seems to be coming from the big box retailers, which generated much of the proliferation themselves.

Failure to communicate
Yet for all the warnings about the dangers of SKU proliferation, you don't see many companies backing away from the practice. If anything, the trend seems to be accelerating. And not just among manufacturers that feel compelled to churn out "new" products to keep up with their rivals. We can point to a number of companies that have successfully competed on the basis of their vast inventories, using their unmatched selection to wallop the competition.

These are not companies that are indulging in mindless proliferation, but rather ones that are using controlled proliferation to support strategic direction. And they've avoided the common supply chain execution problems by bringing their supply chain people into the planning from the start. In other words, they're setting a place at the planning table for everyone ultimately involved with fulfilling orders.

That might sound obvious, but the fact is, companies frequently fail to consult with their supply chain people about the planned introduction of new SKUs. Too often, the warehouse only learns about new SKUs when they begin to arrive. How many there might be and their attributes may not be discovered until they've all been received.

To illustrate the value of giving the supply chain people a seat at the table, you need look no further than the legendary, but true, tale of the well-known catalog merchant and the flag poles. The merchant had found a deal on flag poles—brilliant merchandising in the wake of 9/11, but not without logistical challenges. Unfortunately, the company stumbled in the execution. Not only were putaway and storage found to be impossible when the poles arrived, but they were also too long to be carried cross-wise down aisles by forklifts. The merchant eventually solved the problem by shipping them back to the supplier for conversion to a drop-ship product—a costly solution that would have been avoided if it had gotten the logistics and material handling people involved early on.

Hold out for that seat
The potential pitfalls notwithstanding, the march of SKU proliferation isn't going to slow down, let alone stop. How can you deal with it? Get a seat at the planning table; get in the loop on new products, on corporate strategies, on catalog content. The cost and service consequences of not being there ought to be clear enough by now. How many products that are too long or too wide or too heavy to be stored, or picked, or conveyed effectively is it going to take to hammer that message home?

Look, the buyers are going to continue to make mistakes, some of the merchandisers' gambles aren't going to pay off, and a lot of your peers aren't going to fully appreciate that the supply chain can't operate either in the dark or on auto pilot.

But someone else will be evaluating the players' performance in those other areas of the company. Our worry isn't whether they're doing a good job or a bad one; it's how we can get enough insight into the supply chain ramifications of their actions and decisions to make the right decisions in our world.

In the meantime, there are channels to conquer, competitors to vanquish, catalogs to fill with stuff that sizzles, stores to energize with stuff that's even hotter, and consumers— who actually seem to like things like peanut butter and jelly in the same jar, or lime-flavored cigarettes, or detergent in buckets too heavy to lift, for example—to both entice and satisfy. It all adds up to SKU proliferation. So, buckle up, supply chain professionals; the seat at the table is yours to claim.

Editor's note: For some practical ideas on how to deal with SKU proliferation, click here.