Stock keeping unit

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Stock keeping unit

What is a stock keeping unit?

A stock keeping unit or SKU (which is pronounced “skew”) is a number that retailers make use of to identify and track their inventory or stock. These SKUs are unique codes that are made up of letters and numbers which identify characteristics about every product, like the manufacturer, brand, style, color, size, etc.

Companies issue their own stock keeping unit codes which are specific to the products that they sell. Different companies that sell the same product would use different internal SKU codes.

To put it simply, a stock keeping unit is a unique identifier that is assigned to each product to make record-keeping easier and more efficient.

You’ll generally see SKUs being used in online stores, brick & mortar retail stores, product fulfillment centers, warehouses, catalogues, etc. SKUs are also useful in helping you figure out which of your products are the most profitable, aid you in identifying shrinkage in your inventory, and even enable your customers to find the products that they are looking for in a much faster manner.

Stock keeping unit
Source: The Balance Small Business


What is the difference between SKU and quantity?

SKU is a unique identifier for a type of product and is internally created by the retailer. When a retailer takes stock of its inventory, it counts the quantity that it has available for every SKU that it has.

How do stock keeping units work?

How do stock keeping units work?

Stock keeping units are made up of letters and numbers. These letters and numbers signify the details of the product, like the brand, model number, color, etc. 

Companies use their own ways of coming up with SKUs for their products. There isn’t really a wrong way to create an SKU, but there certainly are some best  that you should strongly consider when you’re creating a store keeping unit for your products.

1

Make your SKUs unique


You don’t want to ever reuse a store keeping unit. Make sure that you have a unique SKU for every single one of your products. Reusing an SKU would just create a mess for you and your store.

2

Don’t make your SKUs too long


A longer SKU would be harder to read and understand. But that’s not the only issue. If your SKU is too long, it might just not fit in quite a few inventory management systems.

3

Avoid using spaces or special characters in your SKUs


If your store keeping units contain spaces or special characters, you might just leave people confused when they see them.

4

Avoid using letters that resemble numbers


You don’t want to confuse people and leave them wondering whether they’re looking at a 0 or an O or even an I or a 1.


How do you calculate stock keeping units?

If you want to calculate the number of SKUs that you have in your inventory, you’ll need to take into account all the product variations that you sell. This includes variations that you have in your product’s color, style, size, etc.

Let’s say you have a product that is available in 4 colors, 3 styles, and 4 sizes. So the number of stock keeping units that you have will be 4 colors x 3 styles x 4 sizes = 48 SKUs.


Why is SKU important?

Why is SKU important?

SKUs are important irrespective of the number of products you sell or the types of customers that you do business with. They’re extremely important because they help with many aspects of eCommerce. Some of these include:

1

Product identification

Regardless of the number of product types that you sell, a well-created SKU could help you identify SKUs across all your sales channels. It helps you easily distinguish between several types of products, based on their characteristics.

2

Inventory Management


Stock keeping units are an extremely important part of inventory management. They allow you to keep track of the level of inventory that you have on your hands and notify you when you’re running low and need to restock. When you use a properly created SKU along with an inventory management system, you could pretty much automate your entire inventory management process.

3

Warehouse management


SKUs will help you organize your warehouse and streamline the process of identifying products for your staff to pack and ship. Speeding up these processes will make sure that your customers get their orders faster and will have a positive impact on customer satisfaction levels.

4

Multi-channel Management


Stock keeping units make it easier for your products across several sales channels. It helps you identify products with different titles and descriptions in a more consistent manner. Your multi-channel management software can even use SKUs to merge and update your stock quantities.

5

Reporting


When you use SKUs, your systems will be able to generate more comprehensive and informative reports. You would be able to track stock levels, shrinkage, sales, slow-moving products, and much more across several sales channels. When you look them up in your accounting system or point of sale, the series of numbers and letters in the SKU would help you in tracking the unique information associated with your product.


Is SKU and barcode the same?

Many people think SKUs are barcodes are the exact same thing, but they are not. 

SKUs are internal codes that individual retailers can create for themselves. If you visit a retailer and look at a product there, you’ll notice that the SKU on it is completely different from the SKU on the same product in another retailer’s store.

While SKUs are internal codes, Universal Product Codes (UPC barcodes) happen to be external product tracking codes that are standardized for any company to use them. This means that UPC barcodes are a proper universal identifier for the product, just like the name suggests. 

The Universal Product Code is linked to a unique product, but it’s the same across all retailers and stores.

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