A Stock Keeping Unit (SKU) is a unique identifier that is assigned to each distinct product and service that can be purchased in business. SKUs are used to track inventory, allowing retailers and other businesses to manage stock levels and understand sales patterns efficiently. Each SKU is typically an alphanumeric code that includes details specific to an item, such as brand, size, color, and other relevant attributes.

Purpose of SKUs

Inventory Management:
SKUs make it easier for businesses to track the quantity of each item available in stock. This helps in managing inventory levels, preventing stockouts and overstock situations.
Sales Analysis:
By tracking which SKUs are selling well, businesses can gain insights into consumer preferences and trends. This data can be used to make informed decisions about promotions, discounts, product placements, and purchasing.
Order Fulfillment:
SKUs help streamline the order fulfillment process by making it easier to locate items in a warehouse. This speeds up the process of picking, packing, and shipping products to customers.
Product Identification:
Each SKU is unique to a specific item, differentiating it from other products and variations (e.g., size, color). This specificity aids in accurate product identification and reduces errors during the handling process.

How SKUs Differ from Other Identifiers

UPC (Universal Product Code): Unlike SKUs, which are unique to each store or company, UPCs are standardized for products across all stores and brands. A UPC remains the same for a product regardless of where it is sold.
ISBN (International Standard Book Number): This is a unique code used specifically for books. Like UPCs, ISBNs are standardized and internationally recognized.
ASIN (Amazon Standard Identification Number): Exclusively used by Amazon, ASINs are specific to products on Amazon’s platform, ensuring that items are uniquely identified within its ecosystem.

Implementation of SKUs

Businesses create their own system of SKUs based on their inventory needs and business model. The design of an SKU typically includes:

Prefixes or Suffixes: Indicating broader categories such as department, category, or brand.
Core Code: Detailing specific item characteristics like model, size, or color.
Sequential Numbers: For unique item differentiation or versioning.

Example of SKU Usage

Consider a clothing retailer with multiple variations of a shirt:

SKU: MENBLUSML001
“MEN” indicates the department (Men’s Clothing).
“BLU” denotes the color (Blue).
“SML” represents the size (Small).
“001” could be an internal sequential number for tracking specific inventory items.

SKUs are integral to modern inventory management systems, playing a crucial role in streamlining operations, enhancing customer service, and driving sales through better product management and analysis.

Read More:

Automated Inventory Management | FreightAmigo