Is Stock Keeping Unit (SKU) Essential for Your Business?

This article will dive into what a stock-keeping unit (SKU) is, which, from its name, seems closely related to stock or inventory. But in the business world, inventory management is actually a crucial aspect.

Because it significantly influences your business's product sales, SKU is just as essential for both small and large-scale businesses. But how does it really impact a business?

You'll find the answers in this article. So, read through until the end because we'll explain in detail what a stock-keeping unit is, its functions, examples, and effective SKU creation tips.

What is a Stock Keeping Unit (SKU)?

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Before delving into SKU's functions, it's important to understand what a stock-keeping unit (SKU) is. A stock-keeping unit is a unique code assigned to each item, whether bought or sold in business. So, you can think of SKU as a unique name for each product.

Usually, SKU is created using a series of numbers attached to the product, making it automatically the product's unique identity. Hence, SKU is sometimes referred to as a part number, product number, or product identifier.

These unique numbers serve as distinguishing codes between one item and another. Also, SKU is often printed in the form of barcodes.

The main purpose of using SKU is to facilitate inventory management, especially when dealing with warehouses full of products. With SKU, organizing and locating items in the warehouse becomes much easier.

Now, the question is, is SKU only used by large businesses with a wide range of products? Not at all! Small business owners should also adopt the SKU system because it's crucial for managing inventory.

There are various other inventory methods that can be used, such as FIFO (First In First Out), LIFO (Last In First Out), and Average. So, business owners, including small shops, grocery stores, or other types of businesses, should implement the SKU system for inventory management.

Functions of Stock Keeping Unit (SKU)

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After understanding what a stock-keeping unit is, it's important to grasp its functions. The main function of SKU is to avoid having the same product numbers. So when a customer requests an item, the business owner can easily locate the requested item. For other functions, let's take a look below!

1. Identifying a Product

The primary function of SKU is to identify a product. Since each item sold by a company needs a unique SKU code, businesses can easily differentiate between similar or nearly identical products.

2. Managing Stock

SKU makes it easier to manage inventory efficiently. With each item having an SKU code, companies can track how much stock is available, how much has been sold, and how much needs to be restocked.

3. Monitoring Product Sales

With SKU, companies can monitor product sales in more detail. They can identify which products are the best-sellers, and which ones are less popular, and adjust their sales strategies based on this data. SKU also helps minimize product defects, losses, or unsaleable items.

4. Handling Orders

SKU codes also greatly assist in managing customer orders. When customers place orders, the system can quickly identify the requested items based on SKU codes, check their availability, and arrange for delivery.

Examples of Stock Keeping Unit (SKU)

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Without realizing it, SKU codes are frequently encountered in everyday products. Here are some examples of products with their SKU codes:

1. Clothing Examples

Uniqlo White T-shirt Size M: SKU-UNIQLO-TS-WHT-M

With explanation:

• The symbol - (dash) is used to separate product information.
• WHT indicates the product color (White).
• M indicates the product size.
• TS indicates the product type (T-shirt).
• UNIQLO is the brand of the product.

2. Laptop Examples

Apple MacBook Pro 13-inch with M1 processor: SKU-APPLE-MBP-M1-13IN

With explanation:

• The symbol - (dash) is used to separate product information.
• Apple indicates the product name.
• MBP indicates the product type.
• 13IN indicates the product size.

Tips for Creating Effective Stock Keeping Unit (SKU)

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Here are some tricks for creating effective stock-keeping unit (SKU) codes that you can try implementing for your business:

Use Memorable Codes

Create SKU numbers that are easy to remember and digest for all team members. Also, avoid using complex combinations of numbers and letters that are difficult to remember.

Keep Codes Simple

Don't make them too short for clarity, but also don't make them too long and complicated. For example, you can use the first letter of the item and numbers for size or color.

Ensure Scannable Codes

Make sure SKU codes can be easily scanned with a barcode scanner. This will facilitate data retrieval and minimize human errors in stock management.

Categorize Products Clearly

Create SKU with clear and consistent grouping to make searching for items easier.

Test SKU Codes

Before activating them in the system, make sure to test the SKU codes. This ensures there is no confusion once they are integrated into the system.

By understanding what a stock-keeping unit (SKU) is, its functions, examples, and tips for creating them, you'll find it easier to manage your product inventory more efficiently. So, don't hesitate to implement the above steps to make your business more successful and well-organized!