What is an SKU (Stock Keeping Unit)?
SKU Definition: An SKU (Stock Keeping Unit) is a uniquely identifiable item for sale and defines all attributes associated with the item, such as manufacturer, description, material, size, color, packaging, warranty terms, etc.
An SKU Code (or Number) is a unique alphanumeric string used to identify a stock keeping unit and is sometimes also called the product code, barcode, part number or MPN (Manufacturer’s Part Number).
A retailer can either choose a code that is convenient for him to understand and use or, he can use the same code that the supplier he bought from, had given to the product.
Find out more about inventory management terminology in this guide.
Is it OK to use the barcode as the SKU (stock keeping unit) code?
A barcode is the graphical representation of a number or a combination of letters and numbers.
Many sellers use barcodes as their SKU codes. This is not a recommended practice, because an SKU code, unlike a barcode, can easily be understood by humans. It is impossible to immediately identify a product by looking at the barcode, as they are just a few numbers and letters. The seller will have to scan the barcode using a barcode scanner or look it up from the barcode database. This is a waste of time.
Why is the SKU Number important for retailers?
The main purpose of giving Stock Keeping Unit codes to your products is to identify and hence efficiently manage your inventory and catalog. Often folks with a large catalog fail to uniquely identify each product leading to losses due to stock estimation and lack of accurate information.
Most inventory management software like Primaseller insists on you using accurate and unique codes.
Let’s look at an example:
Suppose you have 3 Levis shirts of large, medium and small size in your stock. Each variation of the Levis shirt should have its own code.
You can group them together in your store based on the different sizes and colors. But, you might have 30 Levis large shirts in blue color. So, whenever a large blue shirt is sold, unless you have a specific code to that shirt, you will be confused about which large blue shirt was sold. So, unless you have SKU codes to identify each and every one of your product, you will not get reliable inventory details.
Also, check out our free sku generator tool.
How is an SKU useful?
A stock keeping unit for every product in the catalog is useful to:
- Identify your products better: For example, a shirt in size L and one in size M are identified using different SKUs even when the product is the same.
- Manage inventory better: A unique code for each product ensures that you always know how much of it is in stock.
- Reconcile stock: Stock reconciliation is an important part of inventory management and identifying products by their stock keeping unit ensures that all products are counted and recorded accurately. This is also helpful when trying to identify if there are any stock losses and how much has been lost.
- Replenish inventory: Using the SKU as a reference, a reorder point for each product can be set for easy reordering. Using Primaseller, you can even choose to automate purchase orders once products run low.
Using SKUs In A Multichannel sales scenario
If you are a seller selling on multiple channels, for example, a retail store, a Magento store, and Amazon marketplace, you must make sure that you give proper codes to your products. This is because when you are integrating all these channels, in order to identify which product you sold on which sales channel, different Stock Keeping Unit codes help.
Using SKUs In A B2B scenario
When you are selling products to a retailer, he can either use the same codes as yours, or he can give the products, SKU codes of his choice. The only thing to be kept in mind is that either you should know what SKU code your customer (i.e., the retailer) is using or, he should know what SKU code you are referring to that particular product and coordinate accordingly.
How to choose an SKU Number for my product?
- It is advisable to not use your supplier’s SKU code. Create one for yourself. This will be easier because more than one of your suppliers might use the same code for different products. So, this might ultimately end up in a lot of confusion. Apart from this, suppose you switch to another supplier at another point in time. Then, you might have to change the SKU code again. This should be avoided.
- It is ideal to use a code with 4-12 characters.
- Do not start the code with a ‘0’.
- Do not use characters that could confuse people or software.
- Choosing a code differs from business to business – choose what is best for you
Related Read: Making sense of product codes: UPC, ISBN, ASIN and EAN
SKU Number Example:
For example, a seller doing business with apparels will have a very different code from a seller doing business with fashion accessories like earrings, bracelets, etc.
If you are selling a black Polo Tee-shirt of shoulder size 34, then a good SKU code for this can be PO-TS-34-BK
PO – represents that the brand is Polo, TS – represents Tee shirt, 34 – shoulder size, BK – represents the color black.
Every code has to be chosen with the right logic. This will help you in quickly understanding the products as soon as one comes across the SKU code. It is extremely important for accurately tracking your inventory, and thus avoiding losses.
Primaseller is an inventory management software that helps retailers manage inventory and process orders across different channels of sale. We help them in integrating all their offline and online channels of sale like Magento, Shopify, Amazon, eBay, etc. This helps sellers save a lot of time that they spend managing inventory at multiple places.