Inventory management sets the stage for business success. Proper use of stock keeping units (SKUs) can help.
Struggling to keep track of what's flying off the shelves and what's gathering dust? Inefficient inventory management can leave you scrambling to fulfill orders while hurting your bottom line.
Luckily, stock-keeping units (SKUs) can help. SKU numbers capture data about your products, match inventory with customer needs, speed up your checkout process, and much more.
In this article, we'll answer your pressing questions: What is a SKU number? What benefits do they offer? And, more importantly, how can you create them?
A SKU is a unique alphanumeric code that identifies each of your product variations across different sizes, colors, and styles. assigned to every product in your inventory. Every brand, product, and specific version of that product across different sizes, colors, and styles should have a unique SKU number.
SKUs are used primarily to track and organize inventory in manufacturing, logistics, ecommerce, and brick-and-mortar stores. By using SKUs, your business can easily keep tabs on stock levels and identify best-selling items.
A shoe store might organize their SKUs using the following hierarchy:
Using this system, the SKU for the latest Men’s Size 8 White 2024 tennis shoe might be MEN-TN-WH-8-23, while the same shoe in last year's model, blue, and size 10.5 would be MEN-TN-BL-10.5-22.
While both can be displayed as barcodes for inventory management, SKUs and UPCs (short for Universal Product Codes) serve different purposes.
Unlike SKUs, which help you manage your stock internally, UPCs are 12-digit codes that are recognized globally and used for external tracking throughout the supply chain. For example, a book sold in both a local bookstore and a large online retailer will have its unique ISBN displayed as a UPC, making it easier to track sales and distributions across different retail environments.
In other words, two different retailers that sell the same product will likely assign it two different SKUs, but the product will have the same UPC.
SKU vs UPC at a glance:
While a SKU represents a specific product variation, a serial number is a unique identifier assigned to each and every copy of a product. By tracking the product throughout its lifecycle, serial numbers help support warranty management, theft prevention, and recall effectiveness.
Say your business produces a single product in three sizes, and your first order is for 1,000 of each size. You would then have three SKUs and 3,000 serial numbers.
However, keep in mind that not all products warrant a serial number. Serial numbers are more commonly used for high-value items or those requiring stringent tracking, such as electronics, automobiles, and luxury goods.
Ditch the manual counts and misplaced items – SKUs make it possible to monitor each product variation closely. With precise information on which items are selling and which aren’t, businesses can:
SKUs make it simple to organize and categorize a product into different sizes, colors, and varieties. As a result, workers in your warehouse can zero in on the products they need to fulfill orders instead of searching through all the variations.
With a more organized warehouse and sales floor, businesses enjoy:
SKUs go beyond simple stock tracking. They act as a treasure trove of business performance analytics, revealing trends, seasonal fluctuations, and consumer preferences. This rich business performance data empowers you to make strategic decisions that fuel profitability.
For example, with SKU insights, you can craft targeted promotions that boost sales of specific products or categories. Similarly, you might use data on slow-moving items to adjust pricing and avoid dead stock.
There are two ways to create SKUs: manually or using a SKU generator provided by your inventory management software. There are also online SKU generators (like this one from Zoho) that make it easier to manually create SKUs.
When creating SKUs, POS software provider Magestore recommends thinking logically:
While the process of assigning and managing SKU numbers is seemingly straightforward, errors can quickly snowball and affect your inventory management and overall business operations. Here are some common mistakes to avoid:
SKUs are an essential tool for managing an important aspect of your business: your inventory. By leveraging SKUs to their full potential, you can increase your employee productivity while uncovering new insights that might help you optimize your product mix.
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