Stock Keeping Unit

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

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. 

 

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). 

 

 

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). 

 

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. 

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. 

Related Terms

    Read the Latest Market Journal

    Deciphering the Updates: Understanding the latest CPF Changes

    Published on Mar 5, 2024 11 

    The latest changes to the Central Provident Fund (CPF), as unveiled in the 2024 Budget...

    Weekly Updates 4/3/24 – 8/3/24

    Published on Mar 4, 2024 23 

    This weekly update is designed to help you stay informed and relate economic and company...

    Weekly Updates 26/2/24 – 1/3/24

    Published on Feb 28, 2024 62 

    This weekly update is designed to help you stay informed and relate economic and company...

    All-in-One Guide to Investing in China via ETFs

    Published on Feb 27, 2024 426 

    Start trading on POEMS! Open a free account here! Why China? In the vast landscape...

    Navigating the Post-Inflation Landscape in 2024: Top 10 US Markets Key Events to Look out for

    Published on Feb 23, 2024 447 

    Start trading on POEMS! Open a free account here! In 2023, the United States experienced...

    From Boom to Bust: Lessons from the Barings Bank Collapse

    Published on Feb 23, 2024 62 

    Barings Bank was one of the oldest merchant banks in England with a long history...

    Decoding FX CFD 2.0

    Published on Feb 20, 2024 70 

    This article is aimed at availing information and knowledge essential to intermediate forex traders. It...

    Weekly Updates 19/2/24 – 23/2/24

    Published on Feb 19, 2024 89 

    This weekly update is designed to help you stay informed and relate economic and company...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com