What is Stock Keeping Unit (SKU) meaning?
What does SKU mean?
A Stock Keeping Unit (SKU) is a unique, scannable identification code printed on retail store product labels.
This code consists of letters and numbers that identify the characteristics and information of each product such as manufacturer, brand, color, size, and category. It usually consists of 6-18 letters or numbers.
Example: Bailey Bow Black Ugg Velvet Shoes, Size 8, might write “UGG-BB-BLA-08”.
With it, sellers can automatically track the movement of inventory. These codes can also be applied to non-significant but billable products, including body shop repair units or warranties.
SKUs are primarily used to keep track of stock levels. With it, managers can quickly select products to be restocked using scanning.
When a customer purchases an item at the point of sale, at that time, the SKUs are scanned, and the POS system automatically removes the item from stock and records the sale price data.
Where are SKUs used?
Stock keeping unit is mainly used for:
- Warehouses.
- Retail stores.
- Catalogs.
- Product fulfillment centers.
- E-commerce sellers.
How are SKU codes generated?
Each company has its way of creating SKUs for its products, there is no perfect or incorrect way but there are best practices that help to create a good code, which are:
- 1 Make each code unique and never reuse the same code with two different products even if they are the same type.
- Rely on short storage codes as possible, long storage identification codes are difficult to read and may not work in some stock management systems.
- 3 Do not use spaces or special characters. Creating SKUs with spaces or special characters can confuse people.
- 4 Do not use letters that can be confused with numbers such as O and 0.
What is the importance of stock-keeping units?
Organizations or shop owners can manage and plan their inventory efficiently in many ways with the help of this stock-keeping unit system. The most important work it helps with can be summarized in the following points:
1. Understand products and their movements
The Inventory Keeping Module enables an efficient understanding of products and their movements as it makes all stakeholders equally aware of the amount of inventory and product information.
2. Multi-channel selling
Multi-channel selling helps reach a wider range of customers, increase sales, and protect brands. Third-party marketplaces such as Amazon and eBay use a stock-keeping module to handle inventory and process multi-channel sales.
3. Reduce human errors
Inventory and related data such as pricing and stock counting are managed appropriately by tracking products with SKU numbers, helping to prevent all errors related to wrong selection or shipping.
4. Ease of inventory
Inventory-keeping units aid in smooth inventory management, as they identify variables, which in turn help check whether the inventory of products matches actual stock levels.
5. Inventory optimization
SKUs help maximize reorder points on each product variant helping to maintain existing inventory at maximum efficiency.
This is by helping to keep track of the situations of stock increase, decrease, or out-of-stock with the help of reports based on stock-keeping unit codes.
6. Prioritizing some products
The SKU system helps in determining the sales volume of different products. Certain types of colors or sizes are more common than others.
