SUPPLY CHAIN SERVICE STRATEGY

36 | R i g h t S e r v e ™ Customer – SKU Stratification With sufficient data and time, we combine the customer and SKU analysis into a Customer-SKU stratification. The Customer-SKU stratification is a joint distribution revealing the amount of revenue, margin, profit, net income and/or volume in sixteen business strata composed of ABCD customers and ABCD SKUs. An example Customer-SKU stratification is provided in Figure 3.17. The size of the square in a cell represents the revenue, margin, profit, net income or volume. As is nearly always the case, a majority of the revenue, margin, profit, net income, and volume accrues from A customers buying A items. There are typically few customers or SKUs in that strata, but there is intense competition for that business. The least revenue, margin, profit, net income, and volume accrue from D customers buying D items. There are typically many customers and SKUs in that strata, and the competition is glad we operate in that strata. That said, is it logical to provide the same service offering for A customers buying A SKUs as for D customers buying D SKUs? No! Yet, most organizations offer the same service level across all strata. The typical explanation from our clients is that they are providing the highest level of service for all customers. If that is what they are offering, it is most likely a B level of service. A customers and SKUs under-served. C and D customers and SKUs over-served.