Retailers Should Reduce Their SKUs for a Healthier Supply Chain. Here’s Why.

In the current retail and consumer packaged goods (CPG) landscape, the industry faces significant challenges in maintaining a healthier supply chain. A 2023 Consumer Survey by O9 Solutions underscores this, revealing that over half of consumers have encountered product shortages, leading to a shift towards price-based purchasing over brand loyalty and reduced shopping due to price hikes. This situation presents a complex scenario for the CPG and retail sectors, marked by increased marketing costs to attract disloyal customers, higher product and expediting costs, and strained supplier relationships.

Amidst the rapidly changing landscape of consumer demands and complex supply chain challenges, what strategies can retail and CPG giants employ to remain competitive and efficient?

Piyush Shah, Ph.D., Assistant Professor of Supply Chain Management in the Department of Information Systems, Analytics & Supply Chain at Florida Gulf Coast University brings a wealth of knowledge and practical solutions to the forefront, focusing on SKU optimization and the importance of strategic partnerships to promote a healthier supply chain.

“We need similar innovations coming where CPG companies and retailers have to work together to have some sort of local assembly, local packaging, and local production so as to ensure that customers get the products that they need and at the same time the inventories and the cost stay controlled,” Shah said. We need similar innovations coming where CPG companies and retailers have to work together to have some sort of local assembly, local packaging, and local production so as to ensure that customers get the products that they need and at the same time the inventories and the cost stay controlled.— Piyush Shah, Ph.D., Assistant Professor of Supply Chain Management at Florida Gulf Coast University