The encyclopedia · Strategy & Leadership · Operational decision · 2014–2017
Intcomex cut low-profit SKUs where substitutes existed, profit up 18%
Intcomex rationalized its SKU catalog with statistical substitution, raising category profit 18% while still serving 97.5% of demand.
Intcomex
the move
Intcomex's catalog kept expanding faster than anyone could judge, and its supply chain felt the strain of holding products nobody could confidently cull.
The company partnered with a University of Miami team to estimate demand and cross-product substitution statistically, then feed those estimates into a profit-maximizing assortment optimizer.
A product was removed only when a close substitute could pick up its demand, so low-profit SKUs fell away while customer demand stayed covered.
why it works
- Estimating substitution lets the model keep demand after a SKU leaves.
- Profit-based optimization beats rules of thumb for what to cut.
- Tailored per category and market, not one blanket policy.
- A test in Uruguay raised profits 18% while covering 97.5% of demand.
what transfers
When you must prune, don't cut low sellers by gut feel—cut where a measured substitute exists, and pruning becomes a profit lever.
what came after
Applied to a product category in Intcomex's Uruguay operations, the composite method generated an 18% increase in profits with more than 97.5% of product demand still served; revenues also rose because supply matched demand better. It was published in Interfaces as an INFORMS case study.
references
- Less Is More: Harnessing Product Substitution Information to Rationalize SKUs at Intcomex
- Less Is More: Harnessing Product Substitution Information to Rationalize SKUs at Intcomex
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