Inventory Optimization- SKU Rationalization

//Inventory Optimization- SKU Rationalization
Inventory Optimization- SKU Rationalization2019-05-21T19:32:33+00:00

Company Overview: $300M pipe distribution company

Process Improvement

Performance Issue

  • Too little inventory of what sold too much of what didn’t.
  • Buying at sub-class is too broad & contained many SKUs with little or no sales.
  • Looked at on-hand qty & not historic sales.
  • Too much inventory at branches
  • Needed a way to model new branches & Mobile pipe yard.


Improvement Approach

  • Inventory analysis was done according to the end location of the customer, not by the warehouse it was shipped from.
  • In our analysis, we considered size, sales $’s, gross margin, quantity sold and number of customer orders.
  • Vetted SKU lists with Branch Managers


  • Removing 600 pipe & valve SKUs would impact just 4% of sales.
  • Potential to remove or reduce 70% of SKUs at branches for Pipe, Valve & Flanges.
  • 29% moved to HUB go straight to customer reducing overall freight.
  • Branch Mgrs. had little confidence in removing do to delivery issues & that they are not held to turns or ROCE.
  • 31% of branch SKUs should have lower safety stock levels