What Is a SKU and How Does it Benefit You?
What is a SKU?
SKU (pronounced “skew”) stands for “stock keeping unit.” It is usually represented by a 6 to 8-digit alphanumeric code. This code is used to identify your inventory which helps to track inventory and sales.
A SKU can be used to differentiate products by style, color, size, price, etc. Each SKU is assigned to one specific product and is made specifically for your company’s use. The SKUs you create can also be used by vendors or your customers.
This simple idea is immensely powerful if used in the right way. It provides a firm foundation in which some of the most successful and powerful companies around the world are based on. Once you start applying SKU’s into your operation the right way you be setting your business for success.
At Hoj Innovations and WarehouseOS, we help manage SKUs so you can focus on dollars and cents.
What is the difference between a SKU and a UPC?
Although they have some similarities, SKUs and UPCs serve different functions. SKUs are used internally by the seller or retailer to keep track of inventory. UPC stands for “universal product code” and is not only for internal use.
Different retailers and resellers use the same UPC to identify the same items. These are set codes that cannot be adjusted for use to track inventory. Therefore, they are mainly used to track sales.
What are the benefits of using SKUs?
Better Organization and Inventory Tracking
Better organization and management of your inventory help you to clearly track and maximize your profits. SKUs are organized for internal use and can thus be created to meet the unique needs of your business.
You can create SKUs so that the code helps to identify important details about the product, such as the product location in your warehouse and how much of that item you have in stock. This can dramatically reduce time spent looking for items and ensure greater accuracy in your sales transactions and inventory management.
Forecast and prepare for future sales
The better you know your inventory, the more easily you can recognize patterns and learn how to stock inventory for the future. For example, keeping an eye on inventory through SKUs can help you determine a reorder point. A reorder point is the point at which to order more of a specific product to ensure it is not out of stock when buyers want to purchase it.
Knowing your inventory means you can identify fluctuations in sales and demand. This will help you plan when to order specific items, when you’ll need more workers to meet demand, and even forecast the cash flow you’ll have available for payroll.
Enhance your customers’ experience
In addition to product location in your warehouse, SKUs can help organize your physical stores and create a better experience for your customers. For example, you could group similar items near each other or put things that are often bought together next to each other.
You commonly see this in stores like Walmart & Homedepot. Items that traditionally wouldn’t be located in certain aisles are, because they are frequently bought together or complementary. These are easy upsells that increase the value of that customer for you and help them have a better experience as they find everything they need faster.
In a similar manner SKUs can also improve your online store. One example is recommending certain items to customers depending on their relation to the item they are currently looking at. Using SKUs effectively can make the shopping experience more seamless and satisfying.
Gain insight on how to improve your marketing efforts
Properly tracking SKU data helps you identify top-selling items, low-selling items, and items whose sales change seasonally. This data informs your decisions on what products to advertise and where to physically or digitally place items.
How to best create and use SKUs
When creating a SKU, start with the broadest aspect of the item, then get more specific from there.
For example, a piece of clothing could be identified first by the manufacturer or brand, then the style, color, and even which number the item is within the collection. This way, employees can look at the SKU and get relevant information right away that they can use to locate the associated item or identify similar products.
Conclusion
As you can see, SKUs can genuinely enhance your business. If you utilize them well, you will be able to manage your inventory better, improve customer experience, and gather vital data to help you plan ahead so you can thrive.
Reach out to us today to learn how you can use SKUs with WarehouseOS™ and take your business to new heights.
