SKUoverload

SKUoverload is a term used in inventory management and retail to describe a situation in which a company carries more stock-keeping units (SKUs) than necessary to satisfy demand, leading to operational inefficiencies and increased costs. It is a common challenge in fast-moving consumer goods, multichannel retail, and e-commerce where assortment expansion, promotions, private labels, and supplier fragmentation create proliferation of SKUs.

Causes include a desire to offer broad choice, frequent promotions, fragmented data governance, acquisitions that add product lines, and inadequate SKU rationalization processes. Lack of alignment between merchandising, procurement, and supply planning can also contribute to redundant or low-turnover SKUs.

Impacts of SKU overload include higher carrying costs, slower replenishment cycles, more stockouts or obsolete inventory, increased write-offs, and greater complexity in forecasting and merchandising. IT systems and stores may struggle with data quality and assortment analytics, reducing decision speed.

Common indicators are a high SKU count relative to sales, low sell-through of a large share of SKUs, long tail visibility with few high-velocity items, and wide SKUs variance across channels or locations.

Mitigation strategies focus on SKU rationalization and data-driven assortment planning. Approaches include portfolio analysis (ABC analysis), phase-out of slow-moving SKUs, standardization and consolidation with suppliers, category management, and implementing product information management and ERP tools to improve governance and analytics.

Benefits of addressing SKU overload include lower carrying costs, improved forecast accuracy, faster replenishment, more effective promotions, and clearer strategic focus for merchandising and procurement.