ON TRIMMING THE SKU COUNT.

When Apple Computer spun off its Claris division earlier this year, the new company--now called FileMaker Inc.--was left with just two major titles, its flagship FileMaker Pro database and a Web authoring product. But behind the scenes, FileMaker president Dominique Goupil was busy with a much more ambitious effort to narrow the company's focus--a 50% reduction in FileMaker Inc.'s worldwide SKU count.

"We were supporting Mac and Windows versions, 13 different languages, special editions for the education market, upgrades, multi-packs, all kinds of promotional bundles--it was a mess," says Goupil. "There's a natural entropy to SKUs: The sales force always wants more versions, but they don't see the cost of supporting so many SKUs."

In fact, Goupil discovered, half of FileMaker Inc.'s SKUs "just weren't moving at all." Worse, the proliferation of versions often confused the company's customers and left distributors with a good deal of slow-moving inventory.

Goupil's "spring cleaning" left FileMaker Inc. with about 300 active SKUs, which he says seems about right for a $70-$80 million company with a strong international channel. Getting rid of slow-moving inventory helped FileMaker Inc. become more profitable, Goupil notes, and it also made the company more attractive to distributors. "They're now getting better inventory turns and higher fill rates from us," he says.

Goupil says he learned several useful lessons about cutting back the SKU count:

*Watch out for the "strategic" argument: Even when a SKU produces just a trickle of sales, Goupil found, there are often sales and marketing people who insist on keeping that version alive for "strategic" reasons--for instance, to show commitment to a key market segment, or to match a competitor's pricing in a specific channel. "Sometimes there's a valid argument here--but every SKU can't be strategic," he says.

*Make SKU champions accountable for costs: One solution to SKU proliferation is to push responsibility for profitability down to individual product groups and sales organizations, says Goupil. "If our country manager in France insists on supporting SKUs that come back in a big way, he pays a penalty for being wrong."

*Look for creative alternatives to physical SKUs: Instead of asking dealers to stock a separate upgrade SKU for FileMaker Pro, says Goupil, the company now uses rebate coupons that offer discounts to owners of previous releases. Similarly, the company relies more on hybrid Macintosh-Windows packages, and often combines several languages on one CD-ROM. "You probably won't offend a customer in Denmark by having one version for all Scandinavian languages," he points out.

*Expect to take some short-term losses: Most of the savings from SKU reduction--such as reduced inventory overhead and lower R&D costs--are somewhat theoretical and hard to measure, Goupil admits. "But when you cut back on SKUs, you incur tangible costs from returns and inventory writeoffs." Those costs can make a company's quarterly performance look bad--especially if there are several years of obsolete SKUs gathering dust in a warehouse somewhere.

Dominique Goupil, president, FileMaker Inc., 5201 Patrick Henry Dr., Santa Clara, Calif. 95052-8168; 408/987-7202. E-mail: [e-mail].