Demand planning and accurate forecasting is an essential component of operations management as it ensures that you have enough products on hand or scheduled for production to meet future demands.
In most organizations, SKUs or “Stock Keeping Units” are used to identify each individual product or service offered using an alphanumeric code. SKUs are usually specific to retailers and help them manage their inventory.
With SKUs, customers and retailers are easily able to distinguish between individual products and tell the differences among them. While SKUs are beneficial in terms of identifying products, having too many SKUs can lead to unnecessary business complexity and an overabundance of suppliers, data, people, and analysis.
Determining how many SKUs should be kept can be challenging. On one hand, you want to give your customers a variety of products as well as attributes such as size, color, pack sizes, etc. On the other hand, it can be very difficult to accurately develop a forecast for production when you have a lot of products and variations.
How Many SKUs Can an Individual Plan?
A question that is prominent among operations is “How many SKUs can an individual plan?”
The answer to this question really depends on the difficulty and complexity of developing an accurate demand forecast. Therefore, there is no single answer to this question as it depends on multiple variables such as the nature of your business, the types of products you produce, as well as the data / technology used for demand forecasting.
Variables Associated with SKUs
The variables associated with SKUs include the following:
Type of Business and Products
- The strategies used to develop a production plan will vary based on the type of products you have. Developing a plan for a mature product is much simpler than trying to plan for new products. This is because mature products have more historical data that allows you to have a better understanding of sales trends over the years. Newer products do not have as much data to determine a long-term production plan as they have not been around as long.
Forecasting Technique
- Demand forecasting allows manufacturing companies to know the quantities of each product they need to produce and can provide insight into setting the price for those items and determine whether they are worth carrying. Most companies will use shipment or order history data to create a statistical forecast. However, other techniques are considering customer input and group forecasting to augment traditional demand forecasting. These new types of demand forecasting are more time-consuming to generate and review, but they generally provide a more accurate forecast.
Forecast Accuracy
- It is important to ensure that the techniques used to generate demand forecasts are accurate and complete. It is especially important to review the accuracy of your forecasts soon after implementing new forecasting techniques as they may need to be adjusted. This can be done by comparing expected vs actual demand. This will allow you to see whether you are carrying too much or too little of a product and help you determine whether certain products are not worth keeping.
Technology Used for Planning
- A large percentage of manufacturing companies still utilize spreadsheets for demand and supply planning. This is ultimately holding companies back from planning the demand for more items and generating accurate forecasts. These types of planning techniques also rely heavily on the experience and knowledge of the planner. Having an integrated system that can perform automatic planning and scheduling actions will help planners handle more SKUs and allow them to spend more time working towards the growth of the company.
A software that can aid in generating demand forecasts and eliminating SKUs is PlanetTogether’s Advanced Planning and Scheduling Software. PlanetTogether is a software that can provide a thorough insight into the operation and eliminate any unwanted cost and boost production efficiency.
We’re able to make strategic decisions that improve operations. We can proactively prepare for anticipated increases or slowdowns in demand.
In addition, PlanetTogether offers analytics reports and dashboards which allow you to have a detailed look at your data and investigate certain KPIs that are important during SKU rationalization.
SKU rationalization refers to the process of determining whether certain products should be continued in the effort of reducing the total number of items to reduce the complexity of the business operation.
The bottom line is that using an advanced planning and scheduling software will help you determine which products are more profitable for your business while simultaneously allowing you to generate more accurate forecasts and handle more SKUs during the production planning process.
Advanced Planning and Scheduling Software
Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.
With PlanetTogether APS you can:
- Create optimized schedules that balance production efficiency and delivery performance
- Maximize throughput on bottleneck resources to increase revenue
- Synchronize supply with demand to reduce inventories
- Provide company-wide visibility to resource capacity
- Enable scenario data-driven decision making
The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system. APS is a step in the right direction of efficiency and lean manufacturing production enhancement. Try out a free trial or demo!
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APS Resources
Topics: SKU
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