Optimizing sales and profit with MML

A distributor's assortment may hold hundreds or thousands of products, but a sales agent cannot offer the entire range to every outlet. When there is no clear rule about which products belong at a given point of sale, the order is shaped by the agent's experience, the products the customer happens to remember, or the situation of the day.

As a result, a product in high demand may be missing from some stores, while others carry more than they can sell. The product is in the warehouse, the agent has visited, and an order has been placed, yet the range is still not used to its full potential.

A Minimum Must List helps to define the minimum assortment required for each point of sale in exactly this kind of situation.

What is a Minimum Must List?

A Minimum Must List, or MML for short, is a list of products that must always be available at a certain type of outlet.

Each product on the list counts as a separate SKU, that is, an assortment unit distinguished by size, flavor, packaging or another characteristic.

For example, a distributor works with three types of points of sale:

• neighborhood store;

• supermarket;

• wholesale outlet.

Small, fast-turnover packaging can matter most for a neighborhood store. A wider assortment suits a supermarket, and large packaging suits a wholesale outlet. For this reason, it is not correct to assign the same MML to every point of sale.

The goal of an MML is not to make the agent sell as many products as possible. Its purpose is to guarantee the availability of the core products that meet demand in each segment.

MML, the sales plan and minimum stock are not the same thing

In practice, an MML is often confused with other indicators.

The MML determines which products should be available at the point of sale.

The sales plan shows how many products, or at what value, should be sold in a given period.

Minimum stock refers to the smallest quantity that must be kept at a point of sale or in a warehouse so that it does not run out.

For example, a 1-liter juice can be included in an outlet's MML. This means the product must be present at that point of sale. However, how many cases you need to order depends on your sales rate, current inventory, lead time and safety stock.

So the MML controls the composition of the assortment. The order quantity must be calculated separately.

How does MML affect sales?

If the product a customer is looking for is not available at the point of sale, the sale may be lost or the customer may switch to another product. GS1's retail strategy points to better on-shelf availability planning as a way to increase customer satisfaction while reducing overstocking (GS1 Retail Strategy 2023–2027).

An MML helps the distributor answer the following questions:

• Which products should be present in the majority of points of sale?

• At which points are critical SKUs missing?

• Does the agent's visit actually expand the range?

• Is the product out of stock, or is the agent simply not offering it?

• Which products occupy shelf space but are not profitable enough?

An MML does not automatically increase sales on its own. The result depends on the correct structure of the list, availability in the warehouse, the agent's performance, price, demand and the quality of delivery.

How to create an MML for points of sale

1. Divide the points of sale into segments

Differentiate the points of sale before building a single general list. The following criteria can be used for segmentation:

• trade channel;

• point size;

• area;

• customer flow;

• product category;

• average order;

• storage conditions;

• previous sales history.

For example, it makes no sense to assign a product that requires special storage conditions as a mandatory assortment item to a point of sale that has no refrigeration equipment. If the product fails to sell, the cause is not the agent's performance but the limitations of the outlet.

Retail research confirms the importance of tailoring the assortment to a specific customer segment, local market and shopping situation (Journal of Retailing: Strategic Assortment Decisions).

2. Select the products for the MML based on data

It is not enough to list only the best-selling SKUs. Products should be evaluated against several criteria:

• Sales frequency. How consistently has the product been sold over time?

• Reach across points of sale. At how many eligible outlets is the SKU being ordered?

• Contribution to profit. What does it contribute to gross profit, not just to revenue?

• Turnover. How fast does the product sell at the point of sale?

• Stability of demand. Is it sold regularly, or only seasonally?

• Availability. Can the distributor ensure stable availability of the product?

• Role in the assortment. Does the SKU drive traffic, generate high profit, or sell alongside other products?

New products will not have enough sales history. Instead of adding such SKUs straight to the permanent MML, you can first check them through a test list at selected outlets.

3. Separate the core and additional assortment

Splitting the MML into two parts makes it easier to manage:

• core SKUs for all compatible points of sale;

• additional SKUs for a specific segment or region.

For example, 12 products can form the core MML for all neighborhood stores. Another 5 SKUs are added only to large or high-selling points.

This approach preserves the assortment standard without erasing the differences between outlets.

4. Test the MML in real conditions

There is no need to roll the new list out to every point of sale at once. First, you can test it at a share of the points within the same segment.

Before the test, record the following:

• average number of SKUs per point;

• MML execution level;

• sales;

• gross profit;

• order frequency;

• returned and expired products;

• SKUs that are out of stock.

Then compare the results of similar points with and without the MML applied. Any change in sales cannot be explained by the MML alone. Price, promotion, season, region and product availability must also be taken into account.

How to calculate MML execution

The simplest indicator is the MML completion percentage:

MML fulfillment = number of MML SKUs available at the point of sale ÷ total MML SKUs specified for that point × 100%

As an example, 20 mandatory SKUs are defined for a point of sale. At the time of the visit, 15 of them are present:

15 ÷ 20 × 100% = 75%

This result signals that there is a problem, but it does not explain why. The five missing SKUs need a separate investigation:

• the agent did not offer the product;

• the customer did not want to place an order;

• the product was not in the distributor's warehouse;

• a previous order was not delivered;

• the product sells slowly at this point;

• the list was set up incorrectly for this outlet.

Adding only this percentage to the agent's KPI controls the employee but may not solve the underlying process problem.

What indicators should be used to evaluate MML effectiveness?

In addition to MML execution, it is useful to monitor the following indicators together.

Number of SKUs per outlet

This shows the number of unique SKUs on an agent's order or at a point. An increase means the assortment has expanded, but it does not necessarily mean that profit has grown.

MML coverage

This shows how many target outlets each mandatory SKU reaches:

SKU coverage = number of target points with the SKU ÷ total number of target points × 100%

Sales and profit contribution of MML SKUs

This checks how much of total sales and gross profit the mandatory assortment generates.

If a SKU is present at many points but contributes little to sales and profit, its place in the MML should be reconsidered.

Out-of-stock products

Each SKU in the MML should be checked in the distributor's warehouse before it becomes unavailable at the point of sale. It makes no sense to require an agent to fulfil the MML if the product is not available in the warehouse.

Returns and write-offs

Expanding the assortment should not increase the volume of returned, damaged or expired products. Especially for short shelf-life products, the MML should be monitored together with sales velocity and delivery frequency.

How to optimize profit through MML?

Profit optimization does not mean placing more SKUs in every outlet. The goal is to focus limited shelf space, working capital and agent time on the most important products.

To do this, the SKUs in the MML can be divided into three groups:

• Sales-driving products. SKUs with high demand and regular sales.

• Profit-driving products. SKUs that make a significant contribution to gross profit despite relatively low sales volume.

• Strategic products. SKUs that open a new category, complement the assortment, or sell together with other products.

Looking at sales volume alone, low-volume but profitable products may be delisted. Looking at margin percentage alone, high-margin but slow-turnover products build up excess inventory. Sales, gross profit, turnover and coverage should therefore be evaluated together.

Common mistakes when working with MML

Giving the same list to all points of sale

Point sizes, customers and storage capacity vary. A single MML can be more than some points need and not enough for others.

Building the list on the manager's decision alone

Experience matters, but it should be checked against sales, stock, profit and coverage data.

Treating the MML as an unchangeable standard

Demand, season, price and assortment all change. The MML should be reviewed periodically. The renewal period is set according to the sales cycle of the product category.

Holding only the agent responsible

MML failure can also be caused by inventory, logistics, price, customer debt or incorrect segmentation.

Equating the number of SKUs with profit

Adding more products to a point of sale can raise the working capital tied up there and increase returns. The quality of an MML is measured not by the length of the list but by its impact on sales and profit.

How to automate MML control?

An MML can be maintained in a spreadsheet. But as the number of outlets and SKUs grows, it becomes hard to keep the list updated, compare it with orders, and pin down the reasons for gaps.

In a distribution management system, the following information should appear in one place:

• the defined assortment for each segment;

• the current order of the point of sale;

• SKUs missing from the MML;

• distributor warehouse balance;

• previous sales and orders;

• product coverage;

• execution by agent, territory and point of sale;

• the reason an order was not received.

Sales Doctor helps to manage sales agents' orders, stock balance, points of sale and assortment information in one system. Based on this information, the manager can identify where the MML is failing and check whether the problem lies in the agent's work, in warehouse supply, or in the assortment itself.

The value of automation is not only in gathering data. Its main benefit is quickly finding the reason for the difference between the plan and the actual situation.

Practical sequence for implementing MML

You can start working with an MML in the following order:

1. Organize information about points of sale and SKUs.

2. Segment the points of sale by format, territory and sales characteristics.

3. Select SKUs for the MML based on sales, profit, turnover and coverage.

4. Separate the core assortment from the segment-specific additional assortment.

5. Measure current MML execution and record the baseline.

6. Test in a selected area or set of outlets.

7. Track gross profit, stock balance and returns along with sales.

8. Classify the reason behind each failure.

9. Update the list and the process based on the results.

A well-structured MML shows the sales agent which products to prioritize, the supervisor where opportunities are being missed, and the manager how the assortment affects sales and profit.

FAQ

How many SKUs should an MML contain?

There is no single number that fits every company. The number of SKUs is determined by the outlet format, shelf size, demand, delivery frequency and product category.

How often should the MML be updated?

The renewal period depends on the seasonality of the category and its sales cycle. Sudden shifts in demand, new product launches, or SKU outages may require the MML to be reviewed ahead of schedule.

Can MML execution be added to an agent's KPI?

Situations that the agent cannot control should be separated out. If the product is out of stock or the outlet is incorrectly segmented for this SKU, that should not lower the agent's result.

Is MML only for FMCG distributors?

No. An MML can also be used in other fields that work with a wide range and different points of sale. The criteria for building the list vary depending on the product's sales cycle.

What is the difference between MML and an assortment matrix?

An assortment matrix is a company's broader system for distributing products across sales channels or outlet segments. The MML is the list of the most essential, availability-priority SKUs within that matrix.