A stock-keeping unit (SKU) allows vendors to track inventory. It consists of alphanumeric digits and a scannable bar code printed on a product label. The characters define a code that tracks the price, product details, manufacturer, and point-of-sale. SKUs may also be applied to intangiblebut billable products, such as units of repair time in an auto body shop or warranties.
Key Takeaways
A stock-keeping unit (SKU) is a scannable code to help vendors track inventory.
SKUs often appear as bar codes or QR codes along with alphanumeric digits.
SKUs are also used for units of repair time, services, and warranties.
Tracking Inventory
SKUs are used by stores, catalogs, e-commerce vendors, service providers, warehouses, and product fulfillment centers to track inventory levels. Scannable SKUs and a POS system make it easy for managers to determine which products need to be restocked.
When a customer buys an item at the point-of-sale (POS), the SKU is scanned and the POS system automatically removes the item from the inventory and records other data such as the sale price.
SKUs should not be confused with model numbers, although businesses may embed model numbers within SKUs. Businesses create unique SKUs for their goods and services.
Vendor Benefits
Track Inventory: SKUs allow vendors to see what they have in stock, track inventory movement, and provide information on reorder points.
Prepare for Sales or Seasons:SKU data can help vendors decide what to reorder when preparing for holiday seasons or sales.
In Transit Data:SKUs carry data that allow vendors to see where an item is in the shipment process.
Because companies internally create SKUs to track inventory, the SKUs for identical products vary among businesses. Different SKUs help retailers design advertising campaigns without interference from other vendors.
For example, if a company provides the SKU to advertise a certain discounted refrigerator, shoppers cannot easily view the same refrigerator at other sellers using the SKU. This stops competitors from matching advertised prices and poaching customers. In contrast, universal product codes (UPCs) are identical regardless of which business sells the items.
Is a Barcode a SKU?
While SKUs are often depicted as barcodes, they are not always used for the same purposes. Barcodes are meant to identify products of the same type regardless of where they are sold. SKUs identify the seller or vendor. In addition, UPC barcodes typically feature only numbers, while SKUs are alpha-numeric and vary in length.
How Are SKUs Used In E-Commerce?
Individuals who sell products through e-commerce sites can create unique SKUs for their products to help track sales and inventory. Amazon allows sellers to create SKUs for products they sell on the site. In 2023, 600 million products were listed on the Amazon marketplace.
What Does Economic Order Quantity Mean for Vendors?
The ideal quantity of units a company should purchase to meet demand and minimizeinventorycosts is called the Economic Order Quantity (EOQ).
The Bottom Line
Businesses need to track inventory to know how much they're selling, how often to restock, and how fast items sell. Using an SKU simplifies the inventory process, allowing inventory management automation.
SKU stands for “stock keeping unit,” and, as the name suggests, it is a number (usually eight alphanumeric digits) that retailers assign to products to keep track of stock levels internally.
SKU numbers vary based on the retailer's chosen format, but here are a few examples: Example 1: ABC-12345-S-BL (Brand: ABC, Product ID: 12345, Size: Small, Color: Blue) Example 2: 01-200-GR-M (Department: 01, Item number: 200, Color: Green, Size: Medium)
Keep them short. A SKU needs to be 32 characters or fewer so that the same data fits in all systems. Make them unique. Don't reuse SKUs from previous seasons.
Color SKU: Differentiates products based on color. Configuration SKU: Refers to products with different configurations, such as different sizes or colors. Bundle SKU: Identifies a combination of multiple products. Serialized SKU: Uniquely identifies each individual item within a product line.
SKU numbers enable accurate and detailed inventory management. Many retailers need SKUs to reduce phantom inventory, prevent stockouts, and predict when to order new products. If you use a POS, analyzing sales by SKU will reveal which product variants are most and least popular.
One of the most basic and obvious ways to analyze SKU performance is to look at the sales volume and revenue generated by each SKU. This will tell you how popular and profitable each product is, and how much it contributes to your overall sales and revenue goals.
Your SKU should help you easily identify the product in question, incorporating details like manufacturer, color, size, product category, and various other characteristics.
Then, in your spreadsheet, define gross profit ranges and record how many SKUs fall within each range. To get your SKU ratio for each range, divide the number of SKUs in a range by the total number of SKUs (and multiply by 100).
A barcode is a method of representing data in a visual, machine-readable form. Unlike a SKU, barcodes are used externally by all the businesses in the retail supply chain, including wholesalers, retailers, and resellers. Traditionally, barcodes represented data by varying the widths and spacings of parallel lines.
Type your SKU number into the search bar at the top of the page and hit enter. The website will pull up the product. If you don't have a SKU, enter a detailed product title in the search bar and press enter. Look through the search results page for the product you need.
When a customer buys an item at the point-of-sale (POS), the SKU is scanned and the POS system automatically removes the item from the inventory and records other data such as the sale price. SKUs should not be confused with model numbers, although businesses may embed model numbers within SKUs.
Try to avoid confusing letters, numbers, and special characters. Avoid starting a SKU with a zero (Excel will edit out the beginning zero if you put it in a spreadsheet, creating a lot of hassle and headache). Arrange SKU in order of importance, typically generic to specific attributes.
Address: 55021 Usha Garden, North Larisa, DE 19209
Phone: +6812240846623
Job: Corporate Healthcare Strategist
Hobby: Singing, Listening to music, Rafting, LARPing, Gardening, Quilting, Rappelling
Introduction: My name is Foster Heidenreich CPA, I am a delightful, quaint, glorious, quaint, faithful, enchanting, fine person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
:max_bytes(150000):strip_icc()/dotdash_Final_Stock_Keeping_Unit_SKU_May_2020-01-e9246575206c4bba9d4f22dd3272e963.jpg "SKU: What It Is and How It Works (1)")
