Product Profitability How to Perfect SKU Rationalization

In this series of papers, we suggest that more companies adopt a holistic, enterprise-wide and life cycle view of their products. Today, companies can analyze the direct profitability of a discrete product (the subject of this paper), as well as its bottom line contributions through indirect measures. They can view the profit generated through follow-on services and components (life cycle profitability), sales of complementary items (market basket profitability), its contribution through a segment (category management), in conjunction with ongoing investments and seasonality (life time value), and its profit trending (profit acceleration).

Traditional performance measures for products are inadequate for effectively managing products across the life cycle. What is the problem?

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