When you browse an online retailer, you’re likely to come across a variety of products, each with a unique identifier known as a Stock Keeping Unit (SKU). These SKUs are an essential component of e-commerce operations, enabling businesses to efficiently manage inventory, track sales, and offer customers accurate product information.
We’ll explore the importance of SKU systems, how they work, and why they’re crucial for businesses of all sizes.
What is a SKU System?
A Stock Keeping Unit, or SKU, is a unique combination of letters and numbers that identifies a specific product and its attributes, such as size, color, and style. SKUs are used to differentiate between similar products and to track inventory levels, sales, and product details.
In a typical SKU system, each product in a company’s inventory is assigned a unique SKU. For example, a t-shirt might have the SKU “TS-01-M-BL” where “TS” represents t-shirt, “01” represents the style number, “M” represents the size medium, and “BL” represents the color blue.
How Does a SKU System Work?
SKUs are created by the business itself and can be designed in a way that makes sense for their particular products and inventory management needs. While there’s no one-size-fits-all approach to creating SKUs, there are a few best practices that businesses can follow to ensure their SKU system is effective:
Make SKUs unique: Each product should have a unique SKU to avoid confusion and ensure accuracy in inventory management. SKUs may be similar but never identical, avoid duplication.
Keep it simple: SKUs should be easy to understand and remember, using a consistent format that includes essential information like product type, style, size, and color.
Consider scalability: As your business grows, your SKU system should be flexible enough to accommodate new products and changing inventory needs.
Why is a SKU System Important?
Inventory Management: SKUs allow businesses to track inventory levels accurately, making it easier to reorder products and avoid stockouts. They also enable businesses to monitor product performance, identify slow-moving items, and make deliberations about which products to stock and which to discontinue.
Order Fulfillment: SKUs are essential for ensuring accurate order fulfillment. By using unique identifiers, businesses can quickly locate products in their warehouse, package them correctly, and ship them to the customer. This reduces the risk of errors and delays in the order fulfillment process, resulting in happier customers and fewer returns.
Sales Analysis: SKUs enable businesses to track sales by product type, style, size, and color, providing valuable insights into customer preferences and trends. This information can be used to optimize product listings and improve marketing strategies.
Streamlined Operations: E-commerce businesses rely heavily on SKUs to manage their product catalogs, track inventory levels, and fulfill customer orders. Without a robust SKU system, it can be challenging to keep track of product information, manage inventory levels, and ensure accurate order fulfillment.
Amazon also uses SKU’s to track inventory and sales of products sold on its platform.
When creating a listing for a product on Amazon, sellers can specify their own SKU or let Amazon generate one for them. Sellers can assign a unique SKU to each product and include them in their product data feed when creating a listing. Sellers can also use Amazon’s inventory management tools to track and update stock levels for each SKU, and various product details. Additionally, sellers can use reports provided by Amazon to analyze the sales performance for each item by SKU.
A SKU system is an essential tool for any business that sells products online. By assigning unique identifiers to each product, businesses can efficiently manage their inventory, track sales, and provide customers with accurate product information. While the specifics of a SKU system will vary depending on business needs, following best practices can help ensure your system is effective, scalable, and easy to use.
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