Meat + Poultry - October 2005 - 42

the product have to be intimately
involved to make the program successful."
A processor should have all functions
represented to get a full understanding
of why a low-volume doesn't perform.
"Maybe it is a new product or new to
the category, and the last thing you
want to do is just arbitrarily go through
and take the bottom volume and kick
it out," Morris says. "You need some
explanation as to why it represents low
volume. Maybe it's just because it's in
the introductory phase."
A third-party firm should only be

total number of formulas will increase
batch sizes and improve overall operational efficiency. "Most operations
people will tell you they would like
one formula and run it all day long.
This will give great efficiency but is
really not practical. Nonetheless, if minor changes can reduce the number of
formulas, the cost implication can be
great," he adds.
Smithfield Foods' various subsidiaries have been successful with SKU
rationalization programs, according to
Morris. "We had one small company in
Texas that had almost 400 SKUs in its

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"Wal-Mart has had a significant impact. Their
focus is driving cost out of their supply chain and
they are forcing their suppliers to do the same."
used as a facilitator during a SKU rationalization program, he says, but it really
is a team effort. "The sales team has to
be willing to substitute an alternative
product or to sacrifice a particular product if they are going to rationalize it out
of their portfolio," he says.
But perhaps the most important support for a successful SKU rationalization program needs to come from the
executives, he says. "Without support
from the top of the organization, it is a
struggle to make it happen," he says.
Simplifying the system
As part of a SKU rationalization,
processors also need to look at product formulations as well, according to
Morris. Processors should consider
how many different formulas for a
product they have in their portfolio.
They might be surprised at how many
there are, he says. And in many cases,
the differences in formulas can be
subtle. Small changes to reduce the

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portfolio," he says. "As part of a product pruning, SKU product rationalization, formula rationalization program,
we were able to, reduce our variable
product cost, improve plant efficiency
and reduce the number of SKUs down
to 250, a 38% reduction.
"As you can imagine, life is simpler
for the sales force," he continues.
"They have nearly fewer products to
worry about in their portfolio and can
focus on higher margin and volume
SKUs. Life is simpler for operations
because there are fewer products to
worry about producing and packaging.
As a result, manufacturing complexity
is reduced and the efficiency improvements result in added profit to the bottom line."
Dumping deadweight
Earlier this year, ConAgra Foods,
Inc., Omaha, Neb., announced that it
was in the midst of its own massive
SKU rationalization program. Company

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