Ecommerce fulfillment businesses require streamlined operations, real-time tracking of progress across the supply chain, and precise inventory management to stay profitable. This is where the need to analyze and track SKUs comes in, and in this blog post we will discuss why SKY analysis is important, some tips for improved analysis, and how a 3PL can make it easier for you to get it done.
What is SKU Analysis?
Analyzing inventory at an SKU level to get useful data insights such as the exact amount of available inventory and the amount that needs to be purchased, and to effectively manage sales and records in multichannel ecommerce is referred to as SKU analysis. A properly conducted SKU analysis can help businesses identify and categorize fast-moving and slow-moving SKUs, and highlight the storage space being taken by various SKUs and their financial impact on the business. Such useful data insights reflect the consumers’ demand for different SKUs and help in sorting profitable units from non-profitable ones, thus enabling businesses to save on additional inventory carrying costs.
Why is it Important to Consider SKU Analysis?
Since SKU analysis requires some intense manual work, it can be laborious to conduct and replicate, which is why most businesses don’t indulge in it despite its significant benefits. However, the eCommerce companies that do conduct SKU analysis are able to gain helpful insights that can lead to positive financial impact and efficient use of storage space.
Sorting and Removal of Unprofitable SKUs
Just because your business is profitable doesn’t mean it couldn’t be doing better. In fact, when a business is selling certain SKUs at a great profit margin, the chances of less-profitable SKUs going unnoticed are higher. Instead of wasting storage space on units that are slow-moving or possibly even stagnant, it’s best to replace them with products that are in high demand. When businesses overlook tracking SKUs, they may continue to procure items that are already available in huge amounts. SKU analysis enables inventory management personnel to remove unprofitable SKUs and replace them with units reflecting better performance.
Control of SKU Proliferation
As eCommerce businesses grow, they invest in more and more products and increase variations of already existing product offerings to cater to customer demand, however, this can get out of control and badly impact your profits. Instead of investing in offering numerous products and product variations and struggling with storage issues and high carrying costs, conducting an SKU analysis can help in identifying best-selling items and investing in only those.
How to conduct SKU Analysis?
To rightly conduct SKU analysis, it is important to conduct a thorough and granular analysis of each unit and use the gained data insights to implement proper action. Here are some tips to get it right:
Use Inventory Management Software for Data Analysis
A thorough SKU analysis requires having both past and current data about an SKU’s performance and using that data to analyze the performance curve of that SKU. Consumer demand must be forecasted using that data and decisions for future procurement and allocation of storage space must be decided accordingly. All of this can be done accurately and with greater convenience using efficient inventory management software providing updates in real-time.
Conduct SKU Rationalization and Analyze SKU Proliferation
SKU rationalization means analyzing the profitability of various products and deciding their future fate i.e., whether you need to continue procuring or manufacturing those or discontinue them. Conducting SKU rationalization requires measuring and comparing procurement and fulfillment costs, past and current sales data, inventory carrying costs, etc.
While SKU proliferation becomes unavoidable as a business grows and starts offering a greater range of products and product variations, it tends to become uncontrollable if it isn’t closely monitored. It is important to keep close tabs on the profitability of individual SKUs and discontinue slow-moving and less-profitable units.
What is ShipBots approach to SKU Analysis?
ShipBots makes use of automated inventory management and its integrated, analytics dashboard provides useful SKU-level information regarding inventory performance across multiple channels with great ease. Therefore, you can efficiently track SKUs and plan your next business move strategically and with a higher probability of positive financial impact.
Kitting and Bundling
Once useful data insights have been revealed after the SKU analysis, you may consider product bundling to put together related products and present attractive options to customers. This might generate increased revenue and move otherwise-lagging SKUs. ShipBots enables you to obtain all this information from its dashboard and put together bundles and track SKU performance with ease.
Real-time SKU level Updates
At ShipBots, we maintain updated and accurate inventory records maintained in real-time, so you can track SKU levels with greater precision, reorder products before you run out, and remove slow-moving SKUs from the procurement list to avoid accumulating dead stock.
If you wish to outsource your inventory management to a reliable 3PL like ShipBots, you may request a quote here.