When is it time to revise your SKU classification: setting and resetting the decoupling point in a dairy company

Abstract

Classification of stock-keeping units (SKUs) is a much used approach to determine inventory strategy, production strategy or location of the decoupling point for different SKU categories. However, the literature mainly provides approaches for determining categories at a certain moment in time without addressing the need and factors that urge revision of a determined classification. This paper addresses that gap. The empirical part relies on an extensive case study of a dairy company and uses a large longitudinal data-set from the case company. Our study demonstrates that periodic reclassification is needed to either increase the competitive strength of the company or to reduce risks. Still, classification and reclassification are much more a subtle process that balances customer wishes, operational decisions and commercial motives than a straightforward calculation.