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September 5, 2012

Carlo Donati Joins Marketelligent Board of Advisors

Marketelligent to benefit from Mr. Donati’s Global Leadership Experience

Marketelligent, a leading data analytics services provider, has announced that Carlo Donati has joined its Board of Advisors.
"We welcome Mr. Donati to the board and expect to benefit from his valuable experience as a Global business leader" said Roy Cherian, Co-founder and CEO of Marketelligent. "We anticipate that Mr. Donati will provide an invaluable perspective and strategic guidance as we continue to help clients grow their businesses."

"Joining the advisory board at Marketelligent presents an opportunity for me to be in touch with the new exciting world of leveraging data" said Mr. Donati. "Marketelligent has a solid team and in-depth expertise in data analytics which can be leveraged by companies. I look forward to being part of the Board and leveraging my experience to help guide Marketelligent’s growth."

Mr. Donati has had a very distinguished and successful career in the NestlĂ© Group, spanning 34 years and many countries and businesses in three continents.  His prior leadership positions include Chairman and Managing Director of Nestle South Asia, Chief Executive Officer of NestlĂ© Waters, and member of the Executive team at Nestle SA.

September 3, 2012

SKU Rationalization

SKU Rationalization is the process of re-looking at your product portfolio and depending on the business you are in, optimizing it on the basis of one or more parameters.  The objective of a SKU rationalization exercise is to decrease business complexities that arise from managing too many items, various vendor relationships, inventory, business processes, product lifecycles, customer preferences, etc while ensuring there isn’t any substantial impact to the top or bottom line, and customer satisfaction.

Traditional SKU Rationalization: A SKU rationalization exercise usually starts with identifying parameters that need to form the basis of rationalization:
  1. Identify and retain the high volume SKUs: whether low volumes SKUs need to be rationalized - not a good idea if product life cycles are short and they follow the bell curve, you may end up rationalizing something that is yet to perform
  2. Identify and retain the high margin SKUs: whether low margin SKUs need to be rationalized - ideal for businesses with specific vendor issues, not so ideal for enterprises functioning mainly in low margin high volume SKUs, and high margin low volume SKUs
  3. Identify and retain SKUs that have a higher shelf life - an important criteria in the perishable food business and businesses such as apparel, fashion accessories that follow market trends
  4. Identify and retain SKUs that are in tune with current and future customer preferences - product categories that are likely to grow / retain their market share based on historical data, style and color preferences.
Most businesses would have atleast two key criteria that they would like to base their rationalization on; a good approach is to plot a 2 X 2 matrix with these criteria and then decide on the thresholds.

The above illustration plots margin vs. volumes to arrive at an appropriate threshold.

An alternative approach to SKU Rationalization: Although traditional rationalization exercises are carried out at a SKU level, creating segments of similar product types helps the overall objective of decreasing business complexities. Segments may be made at a style level, color level, or any other relevant dimension to evaluate a category performance.  Eg; evaluation of style performance, followed by performance of colors within a style, etc.  In this scenario, entire style families may be rationalized, followed by non-performing colors in some style families, and few entire style families may be retained.
The sequence of arriving at parameters for rationalization and creating segments may be interchanged; also the former may be tweaked depending on the latter’s results.  Also parameters and threshold may vary in each segment.

Developing an evaluation framework model: businesses may like to incorporate various rationalization criteria, modify each, and measure impact; simulators may be built for the same. Such models may have multiple evaluation criteria with varying thresholds.

A SKU rationalization exercise should be supplemented with an impact study: ’what is the revenue impact associated with the exercise’ and how can it be minimized; ‘what is the inventory carrying impact’ and overall savings, 'will it result in Customer dissatisfaction', etc.  Analysis on customer buying patterns of various product categories such as ‘what is the customer reactivation rate on rationalized SKU's’, ‘how many customers return on the same SKU’, ‘is the product seasonal’, ‘what is the ideal time frame to rationalize the category’, ‘what are the substitute products that the customer can be offered’ are also essential.

Please also find a case-study on some of our recent work on SKU Rationalization here.