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Broadly speaking, demarketing might be defined as the opposite of marketing. An examination of any inventory, particularly consumer products, will show that the number of SKUs (stock keeping units) will increase every year. For example, a new style of shoe will come out first in black, and once its popularity is established , it is then offered in three other colors. How does an inventory manager control this explosion of SKUs? One way is to eliminate any item that is not meeting prescribed sales and turnover goals. If the product is not moving, get rid of it!
Here is where the warehouse operator enters the process. Inventory turns can be measured, both in total and by SKU. The warehouse operator is in a good position to do these measurements and report the results. When every item in the warehouse is subject to an inventory turn analysis, the slow movers are readily identified. Then those SKUs that have not turned some specific number of times per year are highlighted in a monthly report, and they are subject to termination. However, criticality must be part of the process.
We had occasion to consult for the water and sewer department of a major city. In analyzing the inventory, we noted a single item that has been in storage for over 40 years. When asked why this item has not been liquidated, we were told that it is a critical and costly valve that controls a significant portion of the water system. Because it is very durable, the original valve has not worn out, but when it does, it is absolutely necessary to have a replacement in stock. Obviously the demarketing principles do not apply in this situation.
We encountered an industrial chemical firm with dozens of obsolete items, some of which have had no movement for more than three years. Local management asked permission to liquidate this obsolete inventory, and permission was declined from the financial department at the home office. We recommended that the obsolete chemicals be moved to a parking lot and stored outdoors. Management informed the home office that they were doing this and that the product was likely to be degraded by outdoor weather conditions. When this happened, local management received permission to liquidate these inactive SKUs. Demarketing can be useful, and the warehouse manager should be part of the process.
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