Essential Perspectives: Revealing the Importance of SKUs in Achieving Business Success

What is a stock-keeping unit (SKU)?

A stock-keeping unit (SKU) is a number that vendors use to continually track inventory in their businesses. The number is typically eight alphanumeric digits long and includes a scannable bar code, and it is most commonly printed on retail merchandise. The characters form a code that keeps track of the price, product information, manufacturer, and point of sale.

A SKU is a unique code made up of letters and numbers that identify each product’s maker, brand, style, color, and size.

Companies issue their own unique SKU identifiers that are distinctive to the products and services they sell. For example, say that a t-shirt company wants to create an SKU for a green V-neck t-shirt, size 6, from the collection released in September 2023. would most likely use two separate internal SKUs in their inventory and retail processes.

Importantly, SKUs are specific to your brand’s inventory. The SKU you allocate to a specific item differs from the one used by another business for the same item.

Maintaining unique codes for each sort of item you sell will make it easier to transfer and manage those things throughout your inventory and retail operations.

Where SKUs are used

You will typically find SKUS in use in:

Warehouses
Retail stores
Catalogs
Commerce Vendors
Product fulfillment centers

Importance of the SKU in logistics

SKU (Stock Keeping Unit) codes play a crucial role in logistics for several reasons:

Inventory Management – SKUs provide a unique identifier for each product or variant, enabling accurate tracking of inventory levels. Logistics operations rely on precise inventory management to ensure sufficient stock levels, prevent stockouts, and minimize excess inventory, which can lead to cost savings and improved customer satisfaction.
Order Fulfillment – SKUs streamline the order fulfillment process by providing a standardized way to identify products. Warehouse staff can quickly locate the correct items for order picking, reducing fulfillment times and improving overall efficiency.
Picking and Packing – SKUs help optimize picking and packing processes by organizing products logically within the warehouse. Grouping similar SKUs or assigning them to specific picking zones reduces travel time for warehouse personnel, increasing productivity and reducing labor costs.
Accuracy and Error Reduction – Using SKUs reduces the likelihood of errors in order fulfillment and shipping. Since each SKU is unique, there is less room for confusion or mistakes when picking and packing orders, leading to fewer shipping errors and returns.
Space Optimization – Efficient use of warehouse space is critical in logistics operations. SKUs facilitate space optimization by allowing for better organization and storage of inventory. Warehouse layout and storage systems can be designed based on SKU characteristics, ensuring optimal use of available space.
Supply Chain Visibility – SKUs contribute to greater visibility and traceability throughout the supply chain. From manufacturing to distribution to retail, each SKU can be tracked at every stage, providing valuable data for demand forecasting, inventory planning, and performance analysis.
Integration with Technology – SKUs are integral to many automated systems and technologies used in logistics, such as barcode scanning, RFID (Radio Frequency Identification), and inventory management software. These technologies rely on SKUs to accurately identify and track products throughout the supply chain.
Product Identification – SKUs serve as a universal language for identifying products across different systems, facilities, and stakeholders. Whether communicating with suppliers, retailers, or logistics partners, using SKUs ensures clarity and consistency in product identification.

Overall, SKUs are essential in logistics for optimizing operations, enhancing accuracy, and improving efficiency throughout the supply chain. By effectively managing SKUs, businesses can streamline their logistics processes, reduce costs, and deliver better service to customers.

Tips on how to correctly create the SKU code

Creating SKU (Stock Keeping Unit) codes effectively involves considering several factors to ensure they are unique, organized, and meaningful for your business. Here are some tips to help you create SKU codes:

Keep it unique – Each SKU code should be distinct to avoid confusion and ensure accurate inventory tracking. Avoid duplicating SKU codes across different products or variants.
Be descriptive – Include key details in the SKU that help identify the product, such as product type, size, color, or other relevant attributes. For example, if you’re selling t-shirts, an SKU for a blue large T-shirt could be something like “TS-BLU-LG.”
Consistency is key – Establish a consistent format for your SKU codes to make them easy to understand and manage. This consistency aids in quickly identifying products and their attributes.
Include product identifiers – Incorporate product identifiers like manufacturer codes or internal product numbers into your SKU codes if applicable. This can streamline communication with suppliers and manufacturers.
Regularly review and update – Periodically review your SKU system to identify any inefficiencies or areas for improvement. As your business evolves, adjust your SKU system accordingly to ensure it continues to meet your needs effectively.

Advantage of SKU in Logistics

SKUs provide granular control over inventory management, allowing logistics operators to efficiently track and manage individual products or variants. With unique SKU codes, warehouses can streamline order fulfillment processes, optimize storage space, and reduce errors in picking and packing operations. This level of precision enhances overall logistics efficiency, leading to improved customer satisfaction and reduced operational costs.

The main differences between SKU and UPC

SKU

A SKU is primarily used for internal inventory management purposes within a specific organization. It helps businesses track inventory levels, manage stock, and facilitate internal operations such as order fulfillment, picking, and packing.

UPC

A UPC is a standardized barcode used for product identification at the point of sale. It enables retailers to scan products at checkout, access pricing information, and update inventory records. UPCs are used universally across different retailers and are essential for sales and distribution channels.

In summary, while both SKU and UPC are codes used for product identification, SKUs are internal to a business and primarily used for inventory management, whereas UPCs are standardized codes used universally for product identification and sales transactions at the point of sale.