Score and evaluate SKUs for potential discontinuation. Weigh revenue, margin, velocity, and carrying cost to identify underperforming products.
SKU rationalization is the process of evaluating each product in your catalog to determine whether it should be kept, improved, or discontinued. Too many SKUs create inventory complexity, increase carrying costs, dilute marketing focus, and strain operations without proportional revenue gains.
This calculator scores each SKU across multiple dimensions: revenue contribution, profit margin, sales velocity, and carrying cost burden. Products scoring below your threshold are flagged for review and potential removal from your catalog.
For e-commerce businesses, rationalization is especially important because every additional SKU requires inventory investment, listing maintenance, advertising budget, and customer service capacity. Eliminating underperformers frees these resources for your best products. Whether you are a beginner or experienced professional, this free online tool provides instant, reliable results without manual computation. By automating the calculation, you save time and reduce the risk of costly errors in your planning and decision-making process. This tool handles all the complex arithmetic so you can focus on interpreting results and making informed decisions based on accurate data.
A bloated catalog drains resources from your best products. SKU rationalization helps you identify and remove underperformers, freeing up capital, warehouse space, and management attention for the products that actually drive your business forward. Having a precise figure at your fingertips empowers better planning and more confident decisions. Manual calculations are error-prone and time-consuming; this tool delivers verified results in seconds so you can focus on strategy.
SKU Score = (Revenue Weight × Revenue Score) + (Margin Weight × Margin Score) + (Velocity Weight × Velocity Score) − (Carrying Weight × Cost Score) − (Complexity Weight × Complexity Score) Each component is normalized to a 0–100 scale Default weights: Revenue 30%, Margin 25%, Velocity 20%, Carrying 15%, Complexity 10%
Result: SKU Score: 72/100 — Keep
Revenue score: 70/100 ($2K/month is moderate). Margin score: 70/100 (35% is healthy). Velocity score: 75/100 (80 units is solid). Carrying cost score: 30/100 (reasonable). Complexity: 30/100 (low). Composite: 72. Above the 50 threshold, this SKU is a keeper.
Every SKU in your catalog has both visible and hidden costs: listing creation and maintenance, photography, advertising, inventory monitoring, customer service, and returns handling. When a product only generates $50/month in margin but requires the same operational overhead as a $500/month product, it's destroying value.
Step 1: Score all SKUs on financial and operational criteria. Step 2: Flag bottom 20% for detailed review. Step 3: Classify flagged items as improve, phase-out, or immediate discontinue. Step 4: Execute sell-through plans for discontinued items. Step 5: Reinvest freed resources into top performers.
Don't rationalize during a product's launch phase (first 90 days), during peak season, or when you lack sufficient data (less than 3 months of sales history). Also be cautious with products in growing categories where velocity may be accelerating.
SKU rationalization is the systematic evaluation and pruning of your product catalog. It scores each product against defined criteria and flags underperformers for improvement or removal. The goal is a leaner, more profitable product portfolio.
There is no fixed target, but the 80/20 rule suggests that your bottom 20–50% of SKUs may contribute very little revenue while consuming significant resources. Start by reviewing the lowest-scoring 10–20% and work your way up based on results.
Consider strategic value alongside the financial score. If removing a product would push customers to competitors for their full purchase, it may be worth keeping despite a low score. Flag it as "strategic" and set a minimum performance threshold.
ABC analysis classifies products by a single dimension (typically revenue). SKU rationalization uses multiple dimensions including margin, velocity, cost, and complexity to provide a more comprehensive evaluation. A product could be A-class by revenue but still warrant discontinuation if it has negative margin.
Plan a sell-through strategy before discontinuing. Options include gradual markdown, bundling with popular items, liquidation channels, or donation for tax benefits. The key is to recover as much value as possible while clearing stock within a defined timeline.
Track total revenue, total profit, inventory turnover, carrying costs, and operational metrics before and after rationalization. A successful rationalization should show improved margins, better turnover, and reduced operational complexity with minimal revenue impact.