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Do you classify your product portfolio as ABC?
ABC classification of the saleable product portfolio is a common practice prevailing across industries. Companies often use it to set differential customer service levels. For example, A class items may have desired service levels of 99%, B class at 95% and C at 90%.
While this classification is rarely questioned, its ramification on the portfolio growth is quite significant. Since C class items get stocked out more often by design, they don’t get their fair share of chance at succeeding. These products get lower trials due to non-availability on retail shelves, lower repeat customers and lower management attention. Are we giving them a fair chance to succeed and come to B or A class in future?
My recommendation is to restrict the use of ABC classification only to the initial period when the supply chain is being redesigned for agility. Once we set the processes and practices in place and start getting 99%+ service levels for A class items, the design is ready to take even the B and C class items to similar service levels.
You will be surprised how many products move up from C to B to A!