The Case for Fewer SKUs

Every automotive parts store faces the same inventory challenge: having the right parts available without tying up too much capital. With thousands of SKUs competing for limited shelf space, finding the right balance isn’t easy.

Bill Nunnery, senior director, sales and marketing, Global Aftermarket at Dana Incorporated, believes SKU consolidation can help stores address that challenge while improving customer service.

“The one challenge that every distributor is faced with is having the right part at the right place at the right time,” Nunnery said.

Fewer SKUs, Greater Efficiency

Inventory management involves more than keeping shelves stocked. Stores must also consider how much working capital they invest in inventory and whether those products generate sufficient sales.

Nunnery said the industry has little tolerance for slow-moving inventory, particularly as shelf space becomes increasingly valuable. Carrying similar products from multiple suppliers can further complicate inventory management. Reducing redundant SKUs can help stores control costs while simplifying the purchasing process.

“And so minimizing the complexity and choices is always a good thing for the customer,” Nunnery said.

That means fewer overlapping options to navigate while helping customers identify the appropriate products for their applications.

Counter pros see firsthand which products customers request most often and which alternatives can serve multiple applications. That experience can provide valuable insight into inventory decisions, particularly when stores evaluate overlapping products or identify opportunities to simplify their assortments.

One Product, Multiple Applications

Nunnery pointed to Dana’s Reinzosil universal sealing compound as an example of how SKU consolidation can benefit parts stores and repair shops.

According to Nunnery, one tube of Reinzosil can replace 10 to 12 conventional RTV sealant varieties. That allows distributors to reduce inventory requirements while offering a product that serves multiple applications.

The benefits extend into the repair bay. A technician might otherwise keep 10 or 12 different tubes of RTV sealant in a toolbox. Those tubes take up space, and their contents have a limited shelf life.

“You’ve got to remember this is a perishable item,” Nunnery said.

Consolidating those products into one sensor-safe solution can simplify inventory management for technicians while reducing the number of individual products they must purchase and maintain. The same principle applies at the parts store.

Nunnery noted that an automotive retailer or independent parts store might dedicate 10 to 12 linear feet of shelf space to RTV products. He estimated that consolidating the category around a universal solution could reduce merchandising requirements by 70% to 80%. That would free valuable space for other products without requiring additional shelving or warehouse capacity.

Keep Customer Needs First

Of course, reducing SKUs shouldn’t come at the expense of product availability or application coverage. Nunnery emphasized that distributors must evaluate consolidation opportunities with their customers’ needs in mind.

“I think when they’re deciding on consolidation, I think it always, again, it starts with the customer first,” he said.

That philosophy should guide inventory decisions throughout the distribution chain. Manufacturers and distributors can use category management analytics to identify opportunities to reduce inventory while maintaining appropriate application coverage.

Ultimately, successful SKU consolidation requires collaboration between manufacturers and distributors. The objective isn’t simply to stock fewer products. It’s to reduce unnecessary complexity, make better use of available resources and ensure customers can get the products they need.

For parts stores, that’s a strategy that can benefit both sides of the counter.