Stock keeping unit rationalization: a cross-functional, cross-firm perspective

Abstract

PurposeAlthough managers have struggled with SKU proliferation for decades, research has provided inconsistent guidance, and the cross-functional and cross-firm aspects of the problem were not considered. The purpose of this paper is to explore the factors that favor successful and sustainable SKU rationalization.Design/methodology/approachA single case study was used to investigate the implementation of an SKU rationalization project by a national restaurant chain in collaboration with its food distributor. Qualitative data analysis techniques were used to understand managers’ perceptions about the SKU rationalization problem and the financial results that were achieved.FindingsThe findings include seven propositions that begin to formalize theory for SKU rationalization. Cross-functional involvement was both a challenge and a critical success factor, and the supplier was an important resource for managing product variety and complexity.Research limitations/implicationsSeven propositions are provided that increase the likelihood of successfully dealing with SKU proliferation.Practical implicationsSKU proliferation increases supply chain complexity and leads to higher costs. The research reports on an SKU rationalization project that saved a company and its supplier $6.7m.Originality/valueA previously unexplored theoretical perspective on SKU rationalization was employed that emphasizes cross-functional alignment, buyer–supplier relationships and the impact on financial performance of a firm.