David Vicente, Nextail Integration Project Manager, provided insights to answer this retail merchandising question.
Multiple SKUs for identical products complicating your inventory management?
What’s a “linked line”, “silent switch”, etc.?
“Linked lines”, also known as “silent switches”, go by many names, but they refer to when several products in a retailer’s inventory are commercially equivalent. In other words, when identical products are identified by multiple SKUs.
This is actually a common occurrence that happens when, for example, continuity products are ordered over multiple seasons or years or when large orders are split among different suppliers. Therefore, products with multiple SKUs may be selling concurrently or may have had different SKUs over time.
What makes having multiple references for one item tricky?
Regardless of the reason for having multiple SKUs, inventory-wise, a retailer might want to consider these items as one and the same in order to properly manage this inventory as they would with any other product. This also has the added benefit of reducing overall SKU proliferation. But this can quickly get complicated.
Use case 1: An item with multiple SKUs being sold at the same time
Imagine that you expect to sell a great volume of white socks this season and therefore have made a very large manufacturing order. To fulfill such a large order, you had to split your order between Manufacturer A and Manufacturer B. But for all intents and purposes, you will sell these socks as the same product even though they have different SKUs in your system.
If you were to sell this product across your physical and online stores, however, how easy would it be to track this inventory over time? How would you ensure that selling SKU A would be reflected in inventory levels and forecasts of SKU B? How would your warehouse know to replenish stores running low on SKU B with both more SKU B and SKU A alike?
Use case 2: An item sold under one SKU in the past vs. its current SKU
The red dress you sold last season was so popular that you’re bringing it back again this season. However, last season you sold it under one SKU and this season the SKU has changed (e.g. because you used a different manufacturer or because the fabric is slightly different).
Luckily, in this case, you won’t struggle with fulfilling replenishment orders like you would if the two SKUs were being sold at the same time. However, what if you wanted to use the performance of last season’s dress (C) to forecast the new dress (D)? Or how could you aggregate the performance of dress “CD”?
Nextail uncomplicates the management of multiple SKUs for identical products
Advanced cloud computing and AI make it possible for Nextail to quickly and easily manage linked lines.
By automatically linking all equivalent products together under a single reference, typically the most recently introduced (the “active” SKU), Nextail can build a “lineage” or chain of successful products, which can easily be modified at any time.
This significantly streamlines inventory management of this product because Nextail will aggregate the data from all connected SKUs in this chain under the new reference, calculating demand for these items as a single product. Nextail will then replenish the product using the stock available in the warehouse for any of the linked lines.
Additionally, for use case 1 in which there are multiple items with different identifiers being sold concurrently, creating this “active” SKU improves the management of this stock, especially when not all of these identical products come in all sizes – an issue that is more common than retailers often realize. Similarly, minimum logistic units (packs) can also vary among linked SKUs, so Nextail takes this into account when generating shipping orders.
Last season’s dress “C” has been replaced by the new dress “D”. Nextail will represent both products under the “active” reference for dress D in stock reporting, even though both C and D can be found in the system. Therefore, if the retailer sold two units of C in the past and three units of D this week, Nextail will show D having sold five units.
What if my stores and warehouses continue to use the original SKUs?
The ability to link different SKUs for identical products is essential to streamlining core inventory management processes. However, sometimes it is important to maintain the original SKUs, especially in the case of replenishments of identical products being sold simultaneously (use case 1).
For example, stores or warehouses will likely continue tracking products under their original SKUs, so Nextail will generate replenishment orders with the original codes being used by the retailers so that they can identify the right physical products. What’s more, Nextail will order the oldest product on the linked line chain from the warehouse first. So, going back to the example of dresses C and D, if there are still units of C left in the warehouse from last season, they will be sent before dress D.
Can I see all of the SKUs united in a linked line chain?
Of course just because identical products will be referenced under a single “active” SKU, this doesn’t mean that older or additional SKUs will disappear. As mentioned above, all original product references will continue to exist within the system, but for forecasting purposes, they will be considered as a sole product.
Retailers can check all of the references within a link line chain in the Nextail platform, which also includes all relevant product information, including its entire “switch” history. However, all changes to replenishment parameters (e.g. thresholds, blocks, etc.) occur within the “active” product.
Additionally, Nextail allows retailers to review the replenishment results for all of the SKUs within a linked line.
In the “Ask Nextail” blog series, we’ve compiled the top most frequently asked questions that we receive. Team members from various teams across Nextail help to answer these questions, bringing expertise from their work helping retailers understand, implement, and be successful managing the radical change that comes with digital transformation in retail.
Contact us for more information on how Nextail can help you automate and streamline your inventory management!