SKU rationalization in the process industry

Abstract

This thesis studies stock-keeping unit (SKU) rationalization in the process industry, focusing on a case company. The promise of an efficiently implemented SKU rationalization project involves simplifying inventory management, reducing operating costs, and improving production efficiency. Therefore, this study aims to identify and find factors for product complexity from the perspective of SKU management. The research method is qualitative and includes a literature review and an empirical analysis of a case company. The analysis intended first to clarify the current state, and then recommend ideas for improvement. In this thesis, it is noticed that the complexity of the SKU is caused by the management of the technical product portfolio, which is the result of customerspecific product requirements and the lack of systematic SKU management. The results show that the rationalization of hot rolling thicknesses reduces the number of SKUs by 37% for the studied steel grades, resulting in reduced inventory costs and process lead time. As a theoretical contribution, this work presents one new possibility to divide the commercial and technical portfolio into a recipe product structure. The managerial implications involve the utilization of production processes more efficiently by optimizing the SKU and emphasizing the importance of SKU management in product management. This study also highlights the strategic importance of SKU rationalization in managing SKUs and improving operational performance in process industries.