Build comparable SKU rows in order
Prerequisites
- Select one decision, period, currency and indirect-tax basis. (not complete)
- Use the same revenue recognition and cost boundary for every SKU. (not complete)
- Include product, fulfilment, channel, payment and expected-return costs consistently. (not complete)
- Use comparable unit or order definitions and reconciled period volumes. (not complete)
- Define whether the decision needs per-order economics, period impact or both.
- Build one row per SKU from records using identical inclusions and exclusions.
- Subtract included variable costs and expected return loss from revenue.
- Calculate retained contribution per order and multiply by period units for total contribution.
- Rank both measures and label which rank supports the current decision.
- Stop if periods, units or cost boundaries are not comparable; reconcile them before ranking.
- Review stock, capacity, customer role and portfolio strategy before acting.
retained contribution per order = revenue - included variable costs - expected return loss; total contribution = retained contribution per order × period units
- revenue
- Recognised SKU revenue on the selected basis (currency units per order) — business record
- included variable costs
- Product, fulfilment, channel, payment and other named order-variable costs (currency units per order) — business record
- expected return loss
- Scenario loss after the stated return and recovery treatment (currency units per order) — business record or user assumption
- period units
- Comparable orders or units in the selected period (units per period) — business record or user scenario
Worked example: the two ranks disagree
Invented neutral scenario. The displayed retained contribution already reflects the visible variable-cost and expected-return boundary.
| SKU | Revenue/order | Variable costs/order | Expected return loss/order | Retained contribution/order | Period units | Total contribution |
|---|---|---|---|---|---|---|
| A | 80 | 58 | 4 | 18 | 100 | 1,800 |
| B | 55 | 36 | 3 | 16 | 160 | 2,560 |
SKU A retains 18 × 100 = 1,800. SKU B retains 16 × 160 = 2,560. The arithmetic supports two different questions; it does not make either SKU an automatic keep-or-drop decision.
Keep ranking separate from product-mix modelling
SKU ranking orders current rows by a named retained measure. Product-mix modelling changes the assumed volume share across products and recalculates total contribution and weighted margin. Use the separate product-mix workflow when the decision is about changing the mix.
SKU ranking questions
- Should SKUs be ranked per order or by total contribution?
- Use per-order contribution for unit economics and total contribution for period impact. Show both when the decision could change with volume.
- Is margin percentage enough?
- No. A percentage omits the absolute contribution and period volume. Keep currency contribution beside any percentage view.
- Should the lowest-ranked SKU be discontinued?
- Not automatically. Validate the record, stock, capacity, customer and portfolio role, and model any proposed mix change separately.
Methodology sources
- SKU Contribution Ranking methodology — Margin101
- Product Mix Profit methodology — Margin101: Separate owner for mix-change scenarios.
Rank, then test the next decision
- SKU Contribution Ranking Planner
Rank SKUs by retained contribution after returns
- Product Mix Profit Planner
Compare contribution when the volume mix changes across products