Inventory management requires the skills of ordering, numbering, and categorising the products according to their size, colour and manufacturers. However, if you want to keep a complete record of all the inventories, stocks, and other products, you must be aware of some terms like SKU. Wondering what is SKU?
SKU is widely used in businesses to categorise each product by specifying a unique alphanumeric code. This code is known as the SKU. There is a possibility that you might confuse it with barcode and UPS.
We will explain what an SKU number is and why it is important in inventory management. Moreover, we will discuss the difference between SKU, barcode, and UPS that are used widely in stock management. Besides, we will discuss how it helps your business grow. So, let’s dive into this exciting discussion!
What is an SKU?
SKU stands for Stock Keeping Unit. SKU is very important to track the product when retailers buy it from the vendor and sell it to the customer. The product purchase from the vendor increases the stock of the retailer and he needs to keep a record of each product effectively.
Similarly, when a retailer sells a product, the inventory or stock of that product reduces. Remembering each product becomes difficult as there are products from different vendors and they have different characteristics.
Therefore, the retailers assign a specific number to each product to highlight the product and its inventory. Otherwise, it would have been a mess if products were being used simply by the manufacturer’s name.
SKU can help a business track the items to know which products are out of stock and which ones are available in the stock.
Why is SKU Essential?
SKU is crucial to the growth of a retail business, e-commerce, and other similar businesses. Assigning a unique number to each product makes your inventory organised and traceable. Similarly, the customer can know which item is available in the stock while shopping online.
Similarly, the customers and retailers come to know which stock is not available and they can wait for its availability. So, SKU is an efficient management system of product tracing and it provides unique information about a specific product in retail or e-commerce business.
How to Develop an SKU number?
Many people ask what is SKU and how to develop it. An SKU structure comprises an alpha-numeric code. The length of this code can vary from eight to twelve numbers. The SKU code consists of different characteristics of the items. For example, it might reflect a product’s vendor name or its abbreviation. Moreover, it might represent the colour code, size and year, etc.
Next, you assign a number to each product to order them. For example, you develop a sequence by giving a number to understand how many products of similar features are available in the stock. Besides, it could be an amalgamation of all these specifications.
Developing an SKU number based on the product style and design is the norm. It helps the owner or the stock managers to identify each product with the help of a unique number. So, they try their best to assign a specific code, easily memorable and recognisable.
SKU numbers can be developed manually or with the help of online SKU generators. The most common method is generating the SKU code during the inventory management and point-of-sale (POS). However, remember to begin SKU with letters, avoiding the use of zero and special characters.
Example of SKU number
Let’s understand the structure of SKU with the help of examples. First of all, let’s suppose there are two vendors, Grace Clothing and Wear Smart, selling their products to a retailer. The retailer uses the products by generating SKU codes for each product.
| Vendor name | First Identifier | Colour | Second Identifier | Sequence Identifier | SKU |
| Grace Clothing | GRC | Blue | BL (11) | 001 | GRC11001 |
| Grace Clothing | GRC | Green | GR (12) | 002 | GRC12002 |
| Grace Clothing | GRC | Red | RD (13) | 003 | GRC13003 |
| Wear Smart | WS | White | WT (14) | 001 | GRC14001 |
| Wear Smart | WS | Blue | BL (11) | 002 | GRC11002 |
You can see the number consists of many characteristics to identify and organise the items. Once the SKU process is complete, selling and tracking the stocks become quite convenient.
SKU vs. Barcode vs. UPS
The products have different code variations and you might get confused about them. For example, barcodes and UPS resemble the SKU in their structure and use. Let’s explain in detail what are the similarities and differences among these three codes.
SKU is an alphanumeric code to identify the product and maintain a sequential record of each product. The length of each code may vary from eight characters to twelve characters. Moreover, each retailer can develop its own SKU and it might vary from seller to seller.
While barcode is the batch of black lines printed on the packing of each product. Bar code is universal in nature and has the same code for similar products. The retailer scans this code to know the price of the product. It also consists of all the information about the manufacturer and the product details. However, every retailer has the same bar code for the same products as the manufacturer develops them.
A UPS is also universal in nature and it is not developed by the retailer. Instead, Its length consists of the exact twelve characters. So, its structure is purely based on numbers and no characters are part of this code. Global Standards Organisation develops the UPS for the products.
How Retailers Can Use SKU to Boost Their Business
Retailers can use SKUs to boost their business in many ways. For example, they can maintain a proper record of the sales record and the inventory record of the most in-demand products. It helps them to increase the inventory of that product to boost sales. Besides, a number of other benefits also help increase the revenues of the merchants and traders.
1. Track Inventory
SKU primarily helps in the maintenance and the tracking of the merchandise from wholesale buying to customer purchase. As a result, the retailers will be aware of the item that are out of stock. Moreover, it will help the merchants with the items which are increasing in inventory.
2. Forecast Sales
Forecasting with inventory management using SKU becomes super easy and convenient. As the inventories diminish soon of an item, you can forecast the higher demand for that product and buy more from the vendors before the items get finished soon.
3. Earn Customer’s Loyalty
Similarly, if merchandise is not in the stock, you can inform the customer and they can wait until the product is available. So, you can inform the customers or they can contact you if they see the product is not available on the e-commerce store. It helps earn loyalty and promote the branding of your business.
4. Analyse Sought-After Items
Moreover, the diminishing inventories indicate the product is in high demand and customers are preferring a certain product over another. So, you can increase the stock of those products in higher demand compared to those with lower demand.
5. Suggestions & Feedback
Comparison between similar products becomes easier and if one item is out of stock, you can suggest similar products to the customers. Moreover, you have observed that similar products are suggested besides the products to improve the user experience and introduce new products to them.
Final Thoughts
Lastly, the SKUs are used to identify, arrange and track the inventory stock of a retail business. It helps a business grow by managing its product stocks efficiently and in an organised manner. SKUs are alphanumeric codes used to maintain a proper record of the stocks.
SKUs are different from the barcode and UPS as it is developed by the retailer himself. On the other hand, the barcodes and UPS are universal and a manufacturer or an international organisation develops them. Two similar products cannot have similar SKUs, but barcodes and UPS will be the same for the products similar in features and vendors.
Therefore, the SKU code not only helps in tracking the inventory stocks but also increases brand loyalty, sales, and the efficiency of the business in many ways. We hope you found the answer of your question of ‘What is SKU’
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Disclaimer: The information about What is SKU in this article is general in nature and does not intend to disregard any of the professional advice.