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What is Stock Keeping Unit (SKU)

What Is a Stock Keeping Unit (SKU)? 

SKU stands for a stock-keeping unit. It is a unique identifier business assigned to a specific product for managing and tracking each product on the inventory. SKU is an identification code made up of letters, numbers, or a combination of both. It contains information such as the product’s brand, manufacturer, design, color, size, and other unique characteristics that distinguish it from other products.

It is used not only in retail, wear houses, and logistics but also in e-commerce platforms to enable customers to easily search for and purchase products.

SKU number examples 

SKU number formats can differ based on the inventory management system of a company and the type of products they sell. Here are some SKU number examples:

  • XYZ5678-BLK-32: This SKU represents a pair of black pants in size 32, made by a brand with the code XYZ5678
  • PQR9876-BLU-8.5: This SKU represents a pair of blue shoes in size 8.5, made by a brand with the code PQR9876
  • LMN2345-YLW-12: This SKU represents a yellow notebook with 12 pages, made by a brand with the code LMN2345.

However, the format of SKU numbers may vary depending on the company’s inventory management system and the type of products being sold.

Why is SKUs important? 

SKUs are really important when it comes to managing and tracking products in your inventory. It makes easier for your product categorization. Let’s dive deep and understand why you need to use SKU.

Inventory Management: SKU numbers help businesses to differentiate based on brand, manufacturer, design, color, size, and other unique characteristics. So it is easier to identify each item in your inventory and manage it.

This makes it easy to monitor stock levels, reorder products when necessary, and identify which products are selling well.

Sales Analysis: SKU gives you sales data for each product. that can be used to identify top-selling and worst-selling items in your inventory. It allows you to take pricing, promotions, and marketing strategies.

Operational Efficiency: The SKU allows you to manage and identify where each product is located in your warehouse. It makes operations more efficient and reduces the risk of errors and confusion.

Data Tracking: The SKU allows you to track the data related to each product such as sales volume, profit margin, and customer behavior. This data helps you to take data-driven decisions and improve overall business performance.

How to get an SKU for a product? and how to create

Creating SKU for a product means assigning an identifier code to a product. You can simply manage your inventory and sales by assigning this unique code to each product.

So, let’s see how you can create SKU numbers for your products

Determine what information you want to include in your SKU: SKU numbers include a variety of information such as product type, color, size, style, and season. Determine what information you are going to give on SKU. Give information that can easily identify the product.

Choose a format for your SKU: SKUs are a combination of letters, numbers, and both. It would help if you considered the combination of the first three letters of the product name, followed by the product size and color.

SKUs can be a combination of letters, numbers, or both. For example, you might use a combination of the first three letters of the product name, followed by the product size and color. Another common format is to use a combination of numbers that correspond to different product attributes

Ensure your SKUs are unique: Make sure you assign a unique SKU to each product. Otherwise, there will be confusion.

Implement your SKU system: after creating SKU then you can implement it on products manually or with the help of software.

Test your system: Ensure that your inventory management system is compatible with your new SKU system. Verify the system by doing inventory audits, monitoring sales, and modifying stock levels based on sales information.

Why you should want an SKU code on a product?

Here is the reason why you need to use the SKU code on a product.

Tracking inventory: By categorizing products with SKU, codes will be easier to find them from your warehouse. Monitor stock levels and identify when a product needs to be reordered.

However, it eliminates the errors that may occur in inventory and keep your inventory efficient and profitable.

Identifying products: By giving SKU codes to each product will help you to easily identify products from your inventory. Especially if you have the same product in different sizes or colors. So you don’t want to spend your valuable time finding products in your inventory.

Organizing inventory: Organizing your inventory is challenging. but giving SKU codes to your products it is easier to organize products. It helps your inventory efficient and organized.

Analyzing sales data: The SKU allows you to identify your top-selling and worst-selling items with the help of sales data. It allows you to plan marketing strategies and save you from financial losses.

Improving customer service: You can provide a premium customer experience by giving SKU codes for your products. As discussed above, SKU codes allow you to quickly find your product and its details from your inventory.

If you got an inquiry from a customer about specific product details such as its price availability then you can quickly find your product and give answers.

SKUs vs. UPC codes

UPC Codes (Universal product code): UPC is a code that is a standardized barcode system used to identify products at the point of sale. it is a 12-digit number code that is encoded into a barcode and scanned by the point of sale system. It can be used to track sales and inventory. it ensures the correct product is selling at the right price.

UPC codes are issued by the Uniform Code Council (UCC) and are unique to each product

SKU vs. barcode 

Barcodes are used in retail operations to speed up the checkout process, reduce errors, and improve overall efficiency. SKUs are unique identifiers used internally by retailers to manage their inventory, while barcodes are machine-readable codes that contain product information and are used for efficient retail operations

Manual SKU management and Automated SKU management

Manual SKU management and automated SKU management are two different methods of managing inventory using Stock Keeping Units (SKUs).

managing SKUs manually is the process of assigning and tracking SKUs manually. This manual operation is done by employees who physically handle the product. They are using electronic records to keep track of inventory levels and sales. This method is mostly used by small businesses, which have small inventory to manage.

The automated SKUs are different from manual SKUs. Automated SKUs are using software and technology to assign and track. This can include barcode scanners, inventory management software, and point-of-sale (POS) systems.

Manual SKU management involves assigning and tracking SKUs manually, However, automated SKUs help you to keep your business efficient, improve accuracy and improve inventory operations.

SKU Number Tips

Here are some tips for creating and using SKU numbers effectively:

  • Keep them simple
  • Be consistent
  • Use a mix of letters and numbers
  • Make them unique
  • Consider variations
  • Use software to manage your SKUs
  • Regularly review and update your SKUs

What is SKU in e-commerce

You can assign a unique code identifier, known as SKU, to each of your products, as we discussed above. It helps you to track stocks, sales, and inventory. By using SKU e-commerce business management will be simple and efficient and helps to provide a premium customer experience.

How to use SKUs to grow your retail business

  • Track inventory accurately: Use SKUs for each product to keep your inventory efficient. It allows you to gain better insight into each product. By checking your inventory you can simply identify which product is selling higher and which is not.
  •  Forecast sales: The SKUs are allows retailers to track their sales and offer a detailed report of your sales. It is useful to identify your sales performance and forecast future sales as well.
  •  Amplify your biggest profit generators: By identifying your biggest profit-generating product you can increase the stock of those items and generate more profit.
  •  Boost customer loyalty and satisfaction: The SKUs help to organize your product and quickly identify where it is located. It allows you to easily identify products and their details when customers ask. This will help you to enhance customer loyalty and satisfaction
  •  Offer customers new suggestions—and increase sales: By using SKUs you can suggest similar products to your customers. by categorizing the similar types of products it will be easier to introduce your similar products.

How to automate SKU process using POS

Automating SKU processes using a Point of Sale (POS) system can help your retail business streamline its inventory management and improve the overall efficiency of the business. Here are some steps to follow to automate the SKU process using a POS system:

Choosing a POS system that supports SKU management: Choosing the right POS system is really important. You have to make sure the system has the capability to manage inventory and opinions to use SKU. Also, make sure the system can automate the operations such as generating SKUs and assigning them to the products.

Assigning: After choosing the POS system you can assign SKUs to your products. You can choose to assign SKUs manually or use the system’s automation features to generate SKUs automatically.

Develop a unified product database: To ensure that all your sales channels are using the same SKUs, create a centralized product database that is linked to your POS system. This will ensure that your inventory and sales data are accurate and up-to-date across all your channels.

Set up automatic stock tracking: After assigning all your SKUs to your products you can track products through the Point of sale system. This will allow the system to automatically update your inventory levels as products are sold or restocked, helping you avoid stockouts or overstocking.

Analyze sales data: You will get a detailed report from POS. This will help you to prepare a better pricing and sales strategy.

However, The SKUs are really important and beneficial to retail business owners to manage and keep their inventory as well as business.

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