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What does a Stock Keeping Unit (SKU) mean?

Stock keeping units are codes that retailers use for managing the products they sell. This code, which is made up of letters and numbers, gives information about a particular product such as its color, size, and brand. A medium-sized green shirt from Brand X, for example, might have a SKU such as “BRANDX – GREEN-M.”

Every company has a unique SKU system that it uses to identify the products they sell. This means even if the same product is sold in two different stores, the SKUs may be different. While SKUs are different from model numbers and help businesses keep track of stock, some companies may use model numbers as part of their SKUs.

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Why is SKU important?

SKUs allow shoppers to differentiate products. SKUs can be used to show similar mystery novels that other customers have purchased. These suggestions can increase sales and boost profits.

SKUs also provide insight into trends in sales. By analyzing SKUs at the checkout, a shop can identify its best-selling items and the underperforming ones. The business can then make informed decisions regarding inventory management. For example, restocking items that are in high demand and reconsidering placement or promotion for slower-moving goods.

SKUs can be used in a variety of ways.

Setting product reorder thresholds
Reconciling stock levels
How to identify shrinkage in stock
Improve inventory tracking accuracy

Calculating SKUs

Consider all the variations of your product when calculating your stock-keeping units. It could be variations of flavor, packaging size or design. This is how many SKUs there are.

Imagine you are a gourmet popcorn seller. You sell popcorn in two different flavors: caramel and cheese. They come in two sizes, regular and jumbo. There are also two different types of packaging, tin or box.

With two sizes and two options for packaging, you have 8 possible product combinations. This means that you have eight SKUs.

SKUs used in

SKUs can be found in the following:

Retail stores
Warehouses
Brick-and-mortar stores
Product fulfillment centers
Ecommerce vendors

How do SKUs form?

Each company has its own unique method of creating SKUs.

Imagine, for example, a blue Adidas Ultra Boost running shoe, in size 9. The SKU of this shoe might be: ADI-UBBLUE-09.

A local grocery store could also give a product code like this to a 50-ounce can of Sunburst Mango Juice, Sugar-Free Version: SUNB SF TIN-50.

It’s important that companies establish a system of consistency, even though there is no universal formula to create a SKU. It ensures that everyone within the company follows the same method and can easily decode SKU. Above all else, SKUs must be simple, so that anyone can understand them, without needing special tools.

Best Practices for Effective SKU Management

The SKU is at the core of managing products. How can businesses stay organized and efficient with SKUs? SKUs can be easily managed with these simple tips:

SKU creation made simplespan size=”font-weight 400 ;”>: Use a straight forward approach when creating SKUs. It should be concise and descriptive, just like the name of a computer file. Using a system like “manufacturer-color-size” keeps it simple. Avoid confusing characters like “O” or “0 .”
When to reorderspan size=”font weight: 400 ;”>: Rather than ordering the same amount for each product, adjust it based on sales. The formula is: Optimal reorder quantity = Average Daily Units Sold * Average Lead Time. This formula helps to adjust inventory levels without having excess inventory.
Group products by similar featuresspan size=”font-weight 400 ;”>: When you have a variety of products, group them by their similarities. If you sell a shirt with three different colors, group the SKUs. This helps with efficient supply chain management, and it also makes it easier for customers to find the variations of products they are interested in.
Review your inventory system and make any necessary adjustmentsspan font-weight=”400 Some SKUs will be winners. Assess your inventory system regularly. It may be time to eliminate some products if they aren’t performing as you expected. Stocking up on unsold products is a waste of space and resources. More options don’t necessarily mean better. Focus on your best-sellers and simplify your offerings.

SKU management does not have to be complicated. Businesses can adopt a systematized and organized approach to ensure that their products are always at the right place, the right time.

SKUs in action

The key to a smooth operation is SKUs. They can help you sort your inventory, ensure that orders are correct, and reduce errors. These codes can help you reduce errors, simplify returns, and strengthen your supply chain.

Stock Keeping Unit FAQ

What does a stockkeeping unit look like?

Stock keeping units (SKUs) are unique identifiers that a retailer or manufacturer assigns to products. The SKU is usually associated with the barcode of an item and used to track stock. The SKU of a black t-shirt, for example, could be P1MT229TB166BK. This code would be used as a unique identifier to help merchants identify the product via a barcode. To create a barcode from your SKU, use Shopify’s free barcode generator.

What’s the difference between an SKU and a UPC?

Both the Universal Product Code and Stock Keeping Unit (SKU) provide distinct ways to identify products. UPCs, which are barcodes with 12 digits that represent products globally and are consistent across all retailers, are universal 12-digit numbers. SKUs, on the other hand, are unique identifiers that retailers and manufacturers use to track their inventory. The SKU number of a product may vary between two or more retailers, but the UPC is always the same.

What is SKU in manufacturing?

A SKU in manufacturing is similar to a product’s name. Each product has its own unique code. This code allows manufacturers to find products quickly and organize their stock.

What is a SKU?

SKUs are often confused with UPC barcodes, but they’re not the same thing. A SKU is an exclusive code that a company creates for its own purposes. A UPC, on the other hand remains the same, no matter who sells it.

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Author: Adeel Qayum

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