SKU (Stock Keeping Unit)

 

Inventory management is essential to maintaining efficient operations in the commercial and retail sectors. The Stock Keeping Unit (SKU) is one of the most crucial instruments for product management and tracking. An SKU is a product's unique identification number that enables companies to track sales information, inventory levels, and other important information. It is important in a number of sectors, including manufacturing, shipping, e-commerce, and retail.

The definition of SKU, its significance in inventory management, how to generate and utilise it, how it differs from other identifiers like UPC, and best practices for SKU management will all be covered in this article.

What is an SKU?
Every product or item in a retailer's inventory is given a unique alphanumeric code known as a Stock Keeping Unit (SKU). SKUs facilitate product tracking from procurement to sales at different points in the supply chain. An SKU is used to identify a particular product and its attributes, including model, size, colour, and brand.

To put it simply, an SKU is a tool that helps suppliers, retailers, and other companies monitor their sales and inventories. It makes it simpler to find, reorder, and manage stock by providing comprehensive information about every item.

SKUs might differ from company to company because they are usually issued by corporations based on internal processes. In contrast, universal product codes (UPCs) are

SKUs' significance in inventory management
Whether a firm is an online marketplace, a massive warehouse, or a tiny store, managing the flow of goods requires effective inventory management. SKUs are essential to inventory control for a number of reasons.

Streamlined Tracking: SKUs give companies the ability to effectively monitor their stock levels, guaranteeing that there is always stock on hand when needed. Businesses can rapidly identify which products are in stock, which require reorders, and which are bestsellers by giving each product a unique SKU.

Increased Accuracy: Human error is decreased by a well-organised SKU system. SKUs offer an organised way to track products along the supply chain, eliminating the need for written notes or human counts.

Ordering and reordering made easier: SKUs simplify the ordering procedure. The SKU enables companies to rapidly determine which products require a new order when they are sold or refilled. SKU codes also aid suppliers in precisely and effectively completing orders.

Improved Reporting: SKUs assist companies in producing thorough reports on inventory levels, sales, and trends. Businesses can estimate demand, make wise decisions, and streamline operations with the help of precise data from SKU monitoring. This is essential for creating plans to control cash flow, cut waste, and boost revenue.

Improved Customer Service: SKUs offer a consistent and unambiguous method of product identification. By making it simpler to find products, process orders, and deal with returns or exchanges, this enhances customer service.

Important Elements of an SKU
A random string of letters and numbers is not all that an SKU is. It is a code that contains details on the features of the product, which makes it an effective tool for companies. An SKU usually consists of a number of parts, such as:

Product kind or Category: The category or kind of product is frequently indicated by the first portion of an SKU. For example, "T" may stand for t-shirts, "S" for shirts, and "J" for jackets in a clothes store. Businesses are able to swiftly filter and identify products across wide categories thanks to this.

Size and Colour: SKUs frequently include details about a product's size, colour, and other variations. For instance, there may be distinct SKUs for small, medium, large, and extra-large sizes of a t-shirt. Similar to this, items with various colour possibilities, such as apparel or electronics, may have SKUs to distinguish between them.

Model Number or Version: The SKU may include a model number or version code for products that are available in various models or versions. This is particularly crucial for equipment, electronics, and other things that develop over time with new features or updates.

Location or Storage Code: The SKU may occasionally contain a reference to the item's selling or storage location. Businesses who have many storage units might find this useful.

Understanding the Distinction Between SKU and UPC
SKUs and UPCs (Universal Product Codes) are both used to identify products, although their functions in retail and business are distinct.

SKUs, or stock keeping units, are specific to each retailer or company.
customised for internal inventory control.
utilised in a business's system for inventory management, ordering, and tracking.
may include more detailed details about the goods, including its model, size, or colour.

The Universal Product Code, or UPC, is a globally accepted barcode that is used to identify goods.
issued by a central body (GS1) to establish consistency across companies across the globe.
mostly utilised for retail inventory monitoring and point-of-sale (POS) scanning.
usually has 12 digits and excludes specific product details like colour and size.

How to Make an SKU
For companies looking to simplify inventory management, creating an SKU is an essential first step. The following recommendations can assist companies in designing successful SKUs, even though there isn't a single, universal approach to developing an SKU system:

Keep It Simple and Consistent: Employees should be able to easily comprehend and utilise the SKU. Steer clear of utilising random or extremely complicated numbers. Make sure that the SKU structure is the same throughout the company because consistency is crucial.

Include Useful Information: As previously said, SKUs ought to include pertinent product information, like size, colour, brand, and category. This facilitates product management and location.

Use Alphanumeric Codes: SKUs are easy to read and comprehend since they frequently combine letters and numbers. While numbers can distinguish between different versions of the same product (e.g., 01 for small, 02 for medium), letters can stand for categories (e.g., "S" for shirts or "J" for jackets).

Steer clear of special characters: Some inventory systems and scanning equipment may have problems with special characters like spaces, dashes, or slashes. For optimal compatibility, limit your communication to letters and digits.

Ensure Scalability: The SKU system should be adaptable enough to take on new products as the product catalogue expands. Steer clear of hardcoding a set quantity of characters or formats that could restrict future expansion.