It all began in the 1980s when Campell’s Soup Company approached leading psychophysicist Howard Moskowitz in the hope he could help them find the one ‘perfect’ spaghetti sauce recipe for their struggling Prego brand. As it turns out, the one ‘perfect’ recipe to satisfy all discerning tastes doesn’t exist. Instead, Prego went on to develop different types of sauce to be sold alongside their existing line. It was a big success, and a new level of consumerism was born: horizontal differentiation.
This evolved into an increase in the number of SKUs (SKU proliferation) and a widespread variety in product lines in every sector. This is becoming more of a problem across the board because of the new realities of e-commerce. Online retailers are finding themselves bloated with SKUs to address different sales channels – be that physical stores purchasing snacks in bulk to stock their shelves or individual consumers buying smaller quantities online.
Challenges associated with SKU proliferation
Rampant proliferation has created an urgent need for an increase in high-level services to enable these systems to run efficiently. The biggest concerns that arise are usually fulfillment-related, for example order complexities and sizes, and manufacturing overheads. All of these are valid and genuine challenges, which require serious innovative efforts to overcome. All of this puts pressure on logistics providers to maintain data and handle incoming new SKUs.
Storage: Having hundreds of different variations of products to distribute is a big risk in terms of space and storage. If one variant of an item goes out of “fashion” when there are still units to be sold, those units will take up a huge amount of space until they are sold.
Picking accuracy: Without the right systems in place, more SKUs can lead to confusion and to mis-ships. Similar looking items in greater numbers in denser locations cause problems for the pickers. There is a higher risk of mis-picks, resulting in costly returns and even lost custom.
Efficiency: More SKUs can make it more difficult to find, pick, pack, and ship products if proper systems and technology are not put in place. Proliferation means individual products are more spread out on the warehouse floor. As a result, it takes longer to pick full pallets, no matter how many people you have available or how cleverly the space is organized.
How can you address these challenges?
By implementing warehouse management solutions. A warehouse management system (WMS) can help improve the input, tracking and rationalization of SKUs within the operation. A crucial aspect to handling SKU proliferation is portfolio management which is much easier to handle when enabled by a top WMS in the distribution center. A WMS that designs agility into the warehouse — to picking and even delivery — is key to keeping up with customer demands in omnichannel operations and the fast-paced e-commerce world.
By changing to voice-directed picking. With challenges focused on accuracy and efficiency in picking, voice-adapted warehouses can help aid workers become more efficient, as the technology helps them to concentrate on the picking task by step-by-step guidance.
By implementinga retail execution/direct store delivery (DSD) solution. The challenges of SKU proliferation expand beyond the warehouse all the way down the supply chain to the retailers themselves. For retailers, SKU proliferation can erode the ability to have the bestselling products in bigger quantities – with an impact on overall sales. Retail execution software can ensure the highest value products are placed in the most prominent selling positions.
By looking into warehouse modelling and simulation. Warehouse simulation software allows creating a digital twin of an operation and properly planning how to lay out the warehouse to accommodate the immense number of SKUs. Mapping travel paths and placing fast moving SKUs in proximity of each other will enhance efficiency and productivity particularly during seasonal or event peaks.
By optimizing supply chain network design and ensuring proof of delivery: In a world where the customer is expecting their shipment yesterday, it’s important to have the ability to plan efficiently down to the last mile. SKU Proliferation not only means more products but likely more shipments. This requires a delivery network that minimizes transport to and from it. When warehouses are closer to cities and other access hubs, trucks will have less distribution distance. Supply chain network design solutions help to determine optimal locations for new locations, taking business specifics into consideration.
By automating. Automated storage and retrieval and warehouse control systems help warehouses realize just-in-time strategies, decreasing the need for advanced order preparation, effectively saving you costs. Additionally, implementing automation solutions increases efficiency in complex warehousing scenarios by enabling case-picking system automation that picks and palletizes various mixed SKU pallets without needing direct labor.
While SKU proliferation presents a common challenge, it offers the opportunity to optimize operations with technology. This can be done in a variety of ways addressing different problems ranging from strategic to operational uses. Which technology is best to use or combine, depends as always on the specifics of each business.