Supply Chain Discussion: Solving the SKU Proliferation Problem

In this discussion, Robert Bowman from Supply Chain Brain speaks with Mark Hasler, consulting alliance director for North America with AutoStore. He explains why an explosion in product variations has posed new challenges for retailers, distributors and warehouses.

He explains how every variation on an individual product — size, colour, flavour, packaging — requires a separate stockeeping unit. And the overall number of SKUs has exploded in recent years.

The trend, says Hasler, arises from retailers’ and producers’ desire to offer personalized and customized products. “Consumers like product variation,” he says, adding that it’s an essential strategy today for keeping up with shoppers’ preferences, staying competitive, and even gaining market share.

As a retailing phenomenon, SKU proliferation dates back to the dawn of the “big-box” store, whose seemingly endless shelves needed to be filled with product. But it’s even more acute today, Hasler says, due in large part to the rise of e-commerce and omnichannel retailing.

With an online presence, “it’s very easy to have a huge product catalog,” Hasler says. In the world of e-commerce, there aren’t aisles that need to be stocked with physical goods.

What SKU proliferation does require, however, is room to store all those extra items in the warehouse. Distributors not only need to keep track of more products; they must also fulfill online orders, retail store stock, direct-to-consumer shipments and B2B activity — all within the same facility.

None of that is possible without modern-day automation, which provides the necessary flexibility to fulfill multiple channels while pivoting when necessary to meet changing consumer demand. It starts with having the right data, Hasler says, then figuring out where to place SKUs so that they can be efficiently retrieved — even those items that aren’t the most popular or fastest-moving, and are in danger of getting lost in the depths of the warehouse.

Source: Supply Chain Brain