Stock Keeping Unit

Table of Contents

Stock Keeping Unit
What is a SKU?
Understanding SKUs
Importance of SKUs
Uses of SKU
Pros and cons of SKU
Frequently Asked Questions

Stock Keeping Unit

SKUs are an essential component of any inventory management system. They help retailers to track inventory levels, identify popular products, and make informed decisions about restocking and ordering new products. By using SKUs effectively, retailers can optimise their inventory management, marketing, and sales strategies, ultimately increasing their revenue and profitability.

What is a SKU?

A Stock Keeping Unit (SKU) is a unique code that identifies a particular product in a store’s inventory system. It is a combination of numbers and letters that help retailers track inventory, sales, and stock levels. Each SKU is unique to the product it represents, allowing retailers to differentiate between similar products and track their sales and inventory levels separately.

Understanding SKUs

Although organisations may include model numbers within SKUs, SKUs and model numbers should be distinct as they are totally different. A product will normally have a Universal Product Code(UPC) barcode and SKU numbers on it. SKU numbers are company-specific and not universally standardised because the producer uses them to track products.

So, you can create whatever SKU system that works for your items and meets your demands. Normally, you’ll want to design a system with a logical flow that starts with top-level identifiers and progresses to more granular codes for vendors and products.

In addition to inventory management, SKUs are also crucial for effective marketing and sales strategies. By tracking sales data by SKU, retailers can identify which products are most popular with customers and adjust their marketing and sales strategies accordingly. For example, if a particular product sells well, retailers can increase its visibility in-store or online or offer promotions to encourage more sales.

For their products and services, businesses develop unique SKUs. For instance, a shop that sells shirts develops internal SKUs that display information on each product, including its colour, size, style, price, maker, and brand.

Importance of SKUs

The importance of SKUs cannot be overstated, as they are essential to effective inventory management. By assigning a unique SKU to each product, retailers can easily track inventory levels, identify which products are selling well, and make informed decisions about restocking and ordering new products. SKUs also help retailers to identify and address any errors in their inventory management system, such as missing or misplaced products.

Additionally, based on SKU data, online retailers may show comparable products purchased by other consumers whenever you buy a product of that same category. By encouraging more purchases from the customer, this technique might boost sales for the business.

Uses of SKU

Online retailers, stores, catalogues, warehouses, service providers, and product fulfilment facilities all use SKUs to keep track of inventory levels. Managers may easily decide which goods need to be refilled thanks to scannable SKUs and a POS system. When a customer makes a purchase, the point-of-sale (POS) system detects the SKU, immediately removing the product from inventory and recording other details like the selling price.

Pros and cons of SKU

While SKUs offer several benefits, they also have a few drawbacks that businesses should be aware of. The pros are as follows:

One of the pros of using SKUs is that they make inventory management more efficient. Businesses can easily track stock levels, sales and reorder quantities by assigning a unique identifier to each product.
SKUs also help businesses identify which products are performing well and which need to be discontinued or adjusted. Additionally, SKUs can be used to optimise the supply chain, reduce waste, and improve customer satisfaction by ensuring that products are always in stock.

However, there are also some cons to using SKUs.

One of the main drawbacks is the time and effort required to set up and maintain the SKU system. Depending on the complexity and size of the business, it can take a huge amount of time to create and implement an SKU system. Furthermore, if the SKU system is not properly maintained, it can lead to errors, confusion, and inefficiencies.
Another potential disadvantage of SKUs is that they may only be necessary for some businesses. Smaller businesses with a limited product range can manage inventory effectively using simpler spreadsheets or pen-and-paper systems. Additionally, businesses that sell unique or customised products may find that SKUs must be more suitable for their needs.

Thus, even though SKUs can offer several benefits to businesses, they also have some drawbacks that should be carefully considered. By weighing the pros and cons of using SKUs, businesses can make an informed decision about whether to implement an SKU system or use alternative methods for inventory management.

Frequently Asked Questions

Is SKU the same as a product?

The term “product” refers to a broad category of items offered in your shop, such as “Jeans.” The variants of this product are known as Stock Keeping Units (SKUs). Products might differ in size, colour, form, and other aspects.

What are SKUs for?

With SKU management, you may assess each product’s upkeep costs to ensure that every piece of inventory fits the company’s financial objectives. When done properly, SKU management helps maximise overall inventory levels and purchasing (and increase revenue).

SKU vs. UPC: What's the difference?

The primary distinction between SKUs and Universal Product Codes (UPCs) is that SKUs are intended for internal usage while UPCs are intended for external use. Both are helpful for controlling inventories, keeping an eye on supply networks, and examining sales patterns.

The length and number of characters are the key ways to distinguish between SKUs and UPCs. SKUs often contain both letters and numbers, whereas UPCs only contain numbers.

While UPCs are generally 12 digits long, SKUs can vary in length as well, often between eight and 12 characters (although they can be as short or long as desired).

Why are SKU numbers important?

SKU numbers are crucial because they allow you to precisely track your inventory to avoid having ghost inventory and to determine when to order new items to ensure that your inventory never runs out.

What is the difference between an SKU and a serial number?

SKUs and serial numbers differ from one another. In contrast to SKUs, which let merchants keep track of each stock item, serial numbers are used to monitor an item’s ownership information and are additionally useful for helping manage warranty information.