The Procurement Glossary » SKU Rationalization

SKU Rationalization

Inventory & Logistics

Definition

Reviewing and reducing the range of SKUs to eliminate redundant, slow-moving or unprofitable items.

Explanation

Too many SKUs raise inventory, complexity and cost. Rationalization prunes duplicates and slow-movers and standardises where possible, cutting carrying cost and simplifying sourcing while protecting genuine variety customers need.

Example

Rationalization cuts 12 near-identical pen SKUs to 3, reducing stock without losing choice.

Related terms

• Stock Keeping Unit (SKU) — A unique identifier for a distinct product or item, used to track inventory and sales.
• Inventory — The goods and materials a business holds for use, sale or production.
• Obsolescence — The loss of value when inventory becomes outdated, unusable or unsellable.
• Demand Management — Influencing what and how much the business buys — challenging need, standardising specs and curbing over-consumption — to reduce spend at the source.

Frequently Asked Questions

What is SKU Rationalization?

Reviewing and reducing the range of SKUs to eliminate redundant, slow-moving or unprofitable items. Too many SKUs raise inventory, complexity and cost. Rationalization prunes duplicates and slow-movers and standardises where possible, cutting carrying cost and simplifying sourcing while protecting genuine variety customers need.

Can you give an example of SKU Rationalization?

Rationalization cuts 12 near-identical pen SKUs to 3, reducing stock without losing choice.

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