Category Assortment Optimization
SKU rationalization with sales velocity and profitability analysis achieving 15-25% SKU reduction while maintaining 98%+ revenue through elimination of low-performing items.
Why This Matters
What It Is
SKU rationalization with sales velocity and profitability analysis achieving 15-25% SKU reduction while maintaining 98%+ revenue through elimination of low-performing items.
Current State vs Future State Comparison
Current State
(Traditional)1. Category manager reviews 250 SKU cereal assortment annually: 'Too many SKUs, need to simplify'. 2. Exports sales report from last 12 months, sorts by revenue, identifies bottom 50 SKUs representing 5% of sales. 3. Manually reviews each SKU: 'This one only sells 10 units/month, maybe discontinue?'. 4. Creates discontinuation list based primarily on sales volume, submits for approval. 5. Post-implementation discovers issues: discontinued SKU#123 was only gluten-free option (customer complaints), SKU#456 had 40% margin (lost high-profit item), SKU#789 was required for promotional bundle. 6. Assortment decisions lack holistic analysis (profitability, customer preference, strategic value).
Characteristics
- • SAP ERP
- • Oracle Retail
- • Microsoft Dynamics
- • Excel/Spreadsheets
- • Planogram Software (e.g., Scorpion, JDA)
- • POS Systems
- • Basic BI Tools (e.g., Tableau, Power BI)
- • Assortment Planning Software (e.g., Toolio, LEAFIO)
Pain Points
- ⚠ Manual Data Collection: Heavy reliance on Excel and manual data entry leads to errors and inefficiencies.
- ⚠ Limited Data Integration: Data silos between ERP, POS, and e-commerce systems make holistic analysis difficult.
- ⚠ Slow Decision-Making: Long planning cycles reduce agility.
- ⚠ Lack of Real-Time Insights: Delayed access to sales and inventory data hampers timely adjustments.
- ⚠ Over-Reliance on Intuition: Many decisions are still based on experience rather than data-driven insights.
- ⚠ Poor Localization: Assortments are often standardized across stores, ignoring local preferences.
- ⚠ Difficulty in Benchmarking: Competitor and market trend analysis is often ad-hoc or incomplete.
- ⚠ High Operational Costs: Manual processes and frequent rework increase labor and time costs.
Future State
(Agentic)1. Assortment Optimization Agent analyzes 250 SKU cereal category across multiple dimensions: sales velocity, profitability (margin), customer ratings, strategic value (only gluten-free option?), substitutability. 2. Agent scores each SKU: 'SKU#123 low sales (10 units/month) BUT only gluten-free option + 4.5 star rating + no substitutes = KEEP. SKU#456 low sales (15 units/month) BUT 40% margin (vs 20% category average) = KEEP. SKU#789 low sales (8 units/month) + low margin (15%) + 2.8 star rating + 3 similar substitutes = DISCONTINUE'. 3. Agent identifies 60 SKUs for discontinuation (24% reduction): collectively represent 2% revenue but 8% complexity cost (Inventory Management Management, logistics, shelf space). 4. Cross-Impact Agent validates: 'SKU#789 discontinuation drives 70% volume to SKU#790 (similar product, higher margin) + saves $50K annual complexity cost'. 5. Agent optimizes to 190 SKUs maintaining 98% revenue, improving category profitability 12% through better mix. 6. 15-25% SKU reduction with 98%+ revenue retention through multi-criteria optimization.
Characteristics
- • SKU sales velocity by location and time period
- • Profitability data (margin, COGS, complexity costs)
- • Customer ratings and review sentiment
- • Strategic attributes (dietary needs, brand portfolio, exclusives)
- • Substitution patterns (what customers buy when SKU unavailable)
- • Bundle and promotional requirements
- • Shelf space and slotting costs
- • Competitive assortment intelligence
Benefits
- ✓ 15-25% SKU reduction vs 10-15% manual approach
- ✓ 98%+ revenue retention (vs 90-95% volume-only analysis)
- ✓ Multi-criteria optimization (sales, margin, ratings, strategic value)
- ✓ Cross-impact analysis prevents unintended consequences
- ✓ Complexity cost savings ($50K annual per category)
- ✓ Category profitability improvement 12% through better mix
Is This Right for You?
This score is based on general applicability (industry fit, implementation complexity, and ROI potential). Use the Preferences button above to set your industry, role, and company profile for personalized matching.
Why this score:
- • Applicable across multiple industries
- • Moderate expected business value
- • Time to value: 2-4
- • (Score based on general applicability - set preferences for personalized matching)
You might benefit from Category Assortment Optimization if:
- You're experiencing: Manual Data Collection: Heavy reliance on Excel and manual data entry leads to errors and inefficiencies.
- You're experiencing: Limited Data Integration: Data silos between ERP, POS, and e-commerce systems make holistic analysis difficult.
- You're experiencing: Slow Decision-Making: Long planning cycles reduce agility.
This may not be right for you if:
- Requires human oversight for critical decision points - not fully autonomous
Parent Capability
Assortment Planning & Optimization
AI-driven assortment planning with space optimization, localization, and continuous refinement achieving 25-40% improvement in sales per square foot.
What to Do Next
Related Functions
Metadata
- Function ID
- function-category-assortment-optimization