SKU rationalisation.
The 80/20 rule applies to almost every SMB inventory book. Cutting the bottom 20% of SKUs by gross-margin dollars typically releases 10 to 15 percent of working capital.
How to rank
Rank SKUs by trailing-twelve-month gross margin dollars, not by revenue. Margin-dollar rank surfaces the slow-moving long tail that quietly absorbs working capital. Revenue rank misses it.
Strategic-depth exclusions
- SKUs that defend a customer trip (the hex bolt in the hardware aisle).
- SKUs tied to a regulated obligation (insurance-mandated, OEM service-parts).
- SKUs that anchor a category for search visibility (the loss-leader sizes).
What the cut produces
A typical cut of the bottom twentieth percentile of margin-dollar rank, paired with reprice of the residual, releases ten to fifteen percent of average inventory inside one cycle. A $600,000 average inventory book commonly releases $60,000 to $90,000 of cash.
Customer-attrition guard
Pull the order history for the cut SKUs. If more than five percent of customer trips contain at least one cut SKU, replace with a single-stock substitute or grant the customer a one-time accommodation. Do not cut without the substitution map.
SKU rationalisation
Margin-dollar rank, defend strategic depth, cut the residual, watch attrition.