What Are SKUs?An SKU is a unique code that businesses assign to each product to keep track of inventory and sales. They are alphanumeric codes, typically between eight and twelve characters which detail characteristics about products including brand, color, size, gender, and stock location.
SKUs Are Not UPC CodesMany people confuse SKUs and UPCs, a.k.a. universal product codes. Watch out, though, they are not the same thing. As mentioned, SKUs are specific to your business and are used internally. On the other hand, UPCs (the numbers that run along the bottom of a barcode) are 12-digit numeric codes and are consistent across the supply chain. If two different retailers are selling the same product, that item will have the same UPC but different SKUs. Merchants do not create UPCs, rather, they are issued by the Global Standards Organization, and companies must apply for them.
Why You Need SKUsThe benefits of SKUs are too numerous to list, but here are a few to get you thinking:
- Tracking inventory: If you have multiple stores, SKUs will help you track inventory across each one, so you have an accurate count of total stock levels.
- Reducing shrinkage: SKUs help you identify and address inventory shrinkage, the difference between on-paper inventory levels and actual inventory. With SKUs, you can count inventory in a particular area of the store and then compare the result with your inventory management software to make sure everything matches.
- Setting reorder points: Since SKUs enable you to track stock levels, you can easily set reorder points to prevent stockouts.
- Identifying bestselling products: With SKUs, you can sift through your sales and identify your bestsellers and shift your sales tactics accordingly to focus on them. Another benefit of SKUs is that you can use them for remarketing and suggestions for related items, e.g. if the desired product is sold out.
How to Create SKUsThe easiest way to build SKUs is with an inventory management system, like the Payanywhere suite offered by Sekure. When it comes to creating SKUs, here are a few best practices:
- Keep length consistent and between eight and 12 characters.
- Use letters and numbers but avoid using zeros (difficult for humans and software to read).
- Ascribe meaning to every character.
- Separate elements with dashes to improve readability.
RBK-W-BL-10In this basic example, the product is Reebok women's shoes, size 10. If you sell more than one type of Reebok women's shoes, then you would add another identifier to distinguish them.
- SKUs and UPCs are not the same.
- SKUs are a crucial part of inventory management.
- SKUs should be consistent and straightforward.