Which SKUs are genuinely redundant?
Separate low-volume items that add little incremental value from products that serve a distinct customer or occasion.
SKU Rationalization · Retail & CPG
Remove complexity without deleting profitable demand.
Identify which SKUs are genuinely redundant, which demand will transfer after delisting, and where simplification improves margin, inventory or operational efficiency.
Questions this decision model answers
Start with the commercial or operational choice.
Where does demand go after delisting?
Estimate substitution into other SKUs versus demand that disappears or shifts outside the portfolio.
Does simplification improve margin?
Combine sales, contribution, inventory and operating complexity rather than optimizing volume alone.
Which products must remain?
Respect strategic brands, pack coverage, customer commitments, minimum range and other commercial rules.
From data to decision
Measure incremental portfolio value, then simplify.
A rationalization decision is strongest when it models both the SKU being removed and the demand that moves afterward.
Sales + product economics
Use transaction or sell-out history, product hierarchy, margin, stock, channel, location and relevant product attributes.
Estimate substitution
Model which products absorb demand when a SKU is removed and where demand may be lost.
Encode range rules
Apply minimum coverage, strategic products, customer commitments and operational constraints.
Rank keep / remove moves
Return candidate rationalization moves with expected portfolio impact and the logic behind each recommendation.
Decision boundary
Low sales do not automatically mean low portfolio value.
A small SKU may protect a price point, pack size, customer segment or occasion. Conversely, a larger SKU may mostly cannibalise another product. Rationalization should estimate incremental portfolio value, not rank products by sales alone.
What disappears?
Estimate demand that is genuinely lost if the SKU leaves.
What moves?
Estimate substitution into retained products.
What improves?
Compare margin, inventory, service and complexity consequences.
Related decision problems
Follow the decision chain.
Direct answers
Questions buyers ask about this decision.
What is the difference between SKU rationalization and assortment optimisation?
SKU rationalization focuses on simplifying or reshaping an existing portfolio. Assortment optimisation is broader and can decide which products to carry by store, channel, customer or market.
Why not remove the lowest-volume SKUs?
Because volume alone does not tell you whether demand will transfer, whether the SKU serves a unique need, or whether removing it hurts margin or category coverage.
Can the model estimate demand transfer?
Yes, where transaction or sell-out data contains enough variation to estimate substitution patterns credibly.
Can business rules be included?
Yes. Strategic products, minimum category coverage, pack requirements, customer agreements and other constraints can be encoded explicitly.
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Bring the decision, constraints and data you already have.
We will structure the model around the action your team needs to take and the evidence required to support it.