Executive Summary

SKU Rationalisation using ABC analysis and innovative thinking in partnership with my client helped them to take control of their distribution model, rationalize a substantial amount of stock, and set up their business for a strong and vibrant future – a transformation back to its core of publishing and marketing great books.  The client transferred to the new 3PL distribution partner only the stock that fit their ongoing plans, and gained flexibility to invest in the future.

Key learnings:

  • Introduced ABC concept and led the client through the initial analysis
  • Encouraged the client to alter it to suit their business which drove ownership and achievability
  • Continued focus in partnership with sales ensured success despite the challenge of legacy inventory management systems

Once the 3PL partner was identified and negotiations completed, we turned our focus to right-sizing the inventory holdings. This was critical not least because the new partner would be charging the client to store the product, but also the team didn’t want to spend heavily on transporting aged / unneeded stock from Melbourne to Sydney, and they wanted to make a fresh start.

Introducing ABC

The first step was to introduce the framework of the analysis, which simply entailed performing a rough SKU level ABC analysis. We used sales data, but to be honest it didn’t really matter as the key was to get the client thinking about contribution of its SKUs to its sales and gross margins, and juxtaposing that with both seasonality and ranging needs.

Tailoring the Concept

Having absorbed the analysis and its rationale, the detailed analysis took several weeks and involved the entire management team. The CEO and Sales Director led that effort, making decisions effectively to fit their business going forward. The CFO and Board were consulted to ensure decisions could be supported financially. This galvanised the entire team to follow through on SKU rationalisation.

Continued Focus to Achieve the Goal

The final step was to dispose of the aged and discontinued stock. This required continued focus in partnership with sales to ensure success despite the challenge of legacy inventory management systems. This overlapped with the physical move of A and B stock to the new 3PL partner in Sydney – an enormous challenge given the time frames provided (50 B-doubles in 25 days). And the team continued to service our order flow during an increasingly busy time gearing up for both Father’s Day and Christmas, only seamlessly switching between the old warehouse and new 3PL partner.

The warehouse team literally picked and packed and shipped 6,000 pallets in less than 2 calendar months, often needing to combine or mix pallets. The Sales Director kicked goals both locally and internationally, and as GM Supply Chain, I kept the warehouse team upbeat and focused, despite the continual challenges of losing good people to new opportunities, confronting a previous lack of inventory management discipline, and needed to dispatch literally by hand due to failing legacy systems.

As the warehouse emptied, the ‘rocks’ emerged  – long ago written off SKUs, samples, displays and components, even old ULDs full of previous owners’ belongings and AS400 monitors! Regardless, the job was completed on time and largely under budget, many thanks to the client’s executive team as well as the diligence of the leaders in the warehouse and the operations team.