Loss-making SKUs aren't a discovery problem. They're a neglect problem.
Every company knows it has unprofitable products. The real issue is that no one distinguishes what kind of loss they're dealing with.
After years in food and FMCG supply chains, I'll say this plainly: lump all loss-making SKUs into one bucket labelled "unprofitable," and you lose the ability to fix any of them.
SKU losses come in three layers.
๐๐ฎ๐๐ฒ๐ฟ ๐ญ: ๐๐ฒ๐ฎ๐ฑ ๐ฆ๐๐จ๐. No meaningful revenue. No margin. Yet still in the portfolio. Typically 5โ10% of SKUs, under 1% of sales. Customers wouldn't notice if they vanished. Your warehouse would.
Each one is invisible on its own โ too small to fight over. So nobody does.
This is the long-tail trap. Individually, these are noise. But stack dozens of them up and they quietly occupy warehouse space, production slots, and transport capacity. In aggregate, they erode your margin structure. And this tail never shortens itself.
๐๐ฎ๐๐ฒ๐ฟ ๐ฎ: ๐ฃ๐ฟ๐ถ๐ฐ๐ฒ-๐ฑ๐ฎ๐บ๐ฎ๐ด๐ฒ๐ฑ ๐ฆ๐๐จ๐. These sell. Sometimes well. But discounts have deepened to the point where every unit sold is a loss. The product isn't the problem. The pricing policy is.
๐๐ฎ๐๐ฒ๐ฟ ๐ฏ: ๐ฆ๐๐ฟ๐๐ฐ๐๐๐ฟ๐ฎ๐น๐น๐ ๐ฏ๐ฟ๐ผ๐ธ๐ฒ๐ป ๐ฆ๐๐จ๐. Demand exists. The product moves. But costs are too high and realised prices too low โ or both. Selling more doesn't fix this. It makes it worse.
Analysis gets you this far. The real problem is what comes next.
๐ช๐ต๐ ๐ฐ๐ฎ๐ป'๐ ๐ฎ๐ป๐๐ผ๐ป๐ฒ ๐ณ๐ถ๐
๐๐ต๐ฎ๐ ๐๐ต๐ฒ๐ ๐ฐ๐ฎ๐ป ๐๐ฒ๐ฒ?
Each layer has a different resistance structure.
Kill a dead SKU โ Marketing blocks it. "Category coverage." And since it's long-tail, the benefit looks trivial. Too small to fight. So it stays.
Fix pricing โ Sales blocks it. "We'll lose the account."
Structurally broken SKUs are the heaviest. Both levers must move at once. Raise prices โ Sales resists. Cut costs โ Three functions resist simultaneously. R&D: "Recipe changes compromise the sensory profile." Marketing: "Taste changes damage the brand." Production: "New specs drop yields."
Both doors need opening, but four or five people hold the keys โ and no one turns theirs first. These SKUs sit unchanged for years.
But there's a deeper issue still.
This classification requires design-stage cost targets from PLM, actual costs from ERP, discount data from Sales, inventory turns from Logistics. Different systems, different time horizons โ all needing to converge.
"What cost, price, and volume was this product designed for?" "What's drifted since โ cost, price, or volume?"
Comparing the starting point with today is the only way to see where things broke. But even with the data assembled, judgement is still required. Context, estimation, interpretation โ all manual.
Gathering data: manual. Making the call: manual. This can be a one-off project. It cannot become a monthly rhythm.
The distance between seeing once and seeing continuously โ that determines how long a loss-making SKU survives.
