By changing the mid-level identifier of a SKU, you’ll get similar products but with slight variations. If a product is out of stock, or if you’d like to recommend a similar product to someone, you can use SKUs. And companies can lean into focusing on product variations with the most demand. Maybe bulk shipping is a better option based on your sell through rate. That means inventory managers can leverage that data when making purchasing decisions. Down to the very minute product variations. Using that data, companies know which products have the highest turnover ratio. Using SKUs provides companies with detailed insight into their inventory levels and movement. Aid in calculating-and boosting-revenue and profits.And that, in turn, allows you to get inventory when you need it but also avoid ending up with excess inventory when you don’t. That makes setting different reorder points for different types of inventory easier. Every product variation will have its own SKU and accurate inventory counts. Using SKU numbers introduces a granularity into your inventory management that makes gauging stock levels easier. Assist in setting accurate reorder points.Overseeing your SKUs is one way to find out. Some methods make work better or worse based on how your supply chain and pipeline operate. You can also set about instituting new inventory management methods like ABC inventory analysis, just in time inventory, dropshipping, or consignment inventory, or product kitting based on your findings. And once you’ve pinpointed the weak spots in your inventory management, you can set about fixing them. When inventory is neatly categorized by SKU, areas of the pipeline with lost, damaged, and obsolete products can be isolated. Inventory shrinkage affects everyone’s bottom line, often quite substantially. Enable companies to identify shrinkage.That’s because inventory categorized by SKU is better organized and more easily identified. Taking physical counts of inventory becomes much easier when every unique item and product variation has a unique SKU number associated with it. And updated in real time via perpetual inventory. From a retailer’s end, inventory on-hand ready for sale is readily available when SKU numbers are scanned upon arrival. It also simplifies SKU rationalization, which is the process of assessing which products to keep and streamlining warehousing data. From a producer’s end, finished goods inventory can be tracked for accurate counts. Using SKU numbers is an inventory management technique that allows businesses to handle a multitude of things that would otherwise be much more difficult. Let’s take a look at building an example SKU number. Along with the total number of inventory items present. That way the SKU number also communicates the order in which the inventory was acquired and processed. The first one large blue teddy bear would end with a sequence modifier of 001. Let’s say we’re adding SKUs to large blue teddy bears. It’s typically item type, gender, brand, color, size, or some other subcategory.Īnd finally the last two to three numbers are sequence identifiers. The middle two or three numbers represent the product’s unique features. From there, the numbers begin to represent more specific information. It provides the most basic information about the product. They could represent a department within a store, a category of goods, or a supplier. These represent the broadest possible categorization level. The top-level identifier of a SKU number is the first two or three alphanumeric characters. The top-level identifier, the middle numbers, and a sequential number at the end. SKU numbers are made of three distinct parts. That's because each product is associated with a unique SKU code. The SKU acronym stands for “Stock Keeping Unit.” SKUs allow businesses to accurately track inventory. What Does SKU Stand For?: A SKU Definition SKU numbers are often located above barcodes, as in the image above.
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