still struggle with SKU rationalization and measuring the cost of complexity caused by SKU
proliferation (Berman and Korsten, 2010).
SKU rationalization is a complex problem because of its implications for multiple
organizational functions and relationships with customers and suppliers (Olavson and Fry,
2006; Enz and Lambert, 2012). The importance of a specific SKU is likely to be viewed
differently by marketing, sales, R&D, manufacturing, procurement and finance which
usually have conflicting goals that affect and are affected by the decision to add or eliminate
SKUs. The cross-functional, decision-making perspectives of the problem have not been
covered in previous research which may explain why SKU rationalization continues to be a
dilemma for managers (Gottfredson and Aspinall, 2005; Jacobs and Swink, 2011).
While much of the literature treats SKU rationalization as a concern internal to a firm
(Closs et al., 2010), product complexity has been shown to impact supply chain relationships
(Eckerd and Girth, 2017). As such, a strictly internal view of SKU rationalization is a
limitation that must be addressed. Also, relationships with customers and suppliers may
impact the success of SKU rationalization projects. Research is needed to understand the
cross-functional and cross-firm characteristics that enable successful SKU rationalization.
In this research, we used a case study approach (Eisenhardt, 1989; Ellram, 1996; Yin,
2013) to explore the key factors that favor the success of SKU rationalization projects. The
research question was:
RQ. How can managers achieve successful and sustainable SKU rationalization?
The remainder of the paper is structured as follows. First, the literature related to SKU
rationalization is reviewed. Next, the methodology is explained, and the findings and
implications are presented. The limitations and opportunities for further research are
described and conclusions are provided.
Although SKU rationalization has been recognized as a business problem for more than five
decades, there is a paucity of literature on the topic and no established theoretical
framework. Consequently, we focus our literature review on the causes and challenges of
product variety and three themes in the literature that appear to be most informative:
product abandonment, cross-functional integration and supply chain relationships.
Causes and challenges of product variety
The main causes of SKU proliferation include an overuse of customer segmentation, an
excessive number of products tailored to each segment, end customers expecting greater
variety, multiple price points for product categories and competition based on variety as a
differentiation strategy (Quelch and Kenny, 1994). The proliferation of SKUs means that
customers’demand is spread over more products, thereby increasing the overall uncertainty
and variability of demand (Fisher et al., 1994). Many times, the market is divided into
smaller, less profitable segments. Product variations may proliferate until they exceed the
market benefits of diversification, which implies that “it is the effective management of
complexity that poses the difficulty”( Jacobs and Swink, 2011, p. 677).
The consequences of SKU proliferation include higher demand variability (Christopher,
2000), the need to invest in operational flexibility to cope with the proliferation (Soman et al.,
2004), end customers’difficulty in differentiating products within a firm’s product offerings,
lower brand loyalty, stagnation of category demand and increased costs (Quelch and Kenny,
1994). The literature on product variety is primarily focused on identifying the amount of
variety required to enhance revenues and avoid operational inefficiencies (Ramdas, 2003).
Variety is typically assumed to increase sales (Ton and Raman, 2010), to enhance market
share (Lindsley et al., 1991) and to lead customers to perceive the brand as being of higher