Guidelines for product management


AA products are your most profitable products and hence, must be treated them with care:

Raise your service levels

  • Secure a high service level
  • These items should have the higest inventory turnover ratio
  • Lowering  cost prices will have a huge impact on your buttom line
  • Spend time on managing these items
  • Make sure your gross margin is acceptable – this is your core business
  • Do remember: running short on AA products will have severe consequences for your business

AC items are defined as having high econimically importance and are sold rarely and irregularly:

  • Securing a high service level is often very costly
  • Optimize your turnover ratio in order to cut costs on inventory
  • These items are high risk –  watch out for obsolecense
  • Spend time on forecasting – be carefull when purchasing
  • Try to shorten the lead time from suppliers
  • These items should only be sold or purchased to order if possible

CA items are the ”paper clips” of supply chain companies: Everybody buys them – but their economically impact is very low:

  • Secure a high service level – the cost of doing so is relatively low
  • A high inventory turnover ratio is expensive – the transaction costs will eliminate your contribution margin
  • Too many purchases can cause problems down at the goods reception
  • Buy large quantities unless the volumes are causing space problems on inventory
  • Apply simple management policies

CC items are defined as your least important items – which are rarely sold

  • Securing a high service level is very costly
  • Most items are dead or with a very low frequency with almost no usage – a few items may be new
  • A lot of these items should be phased out
  • These items most likely have excessive levels of inventory – clean up your inventory!
  • Purchase these items once or twice a year
  • Identify which items should be made or purchsed to order