SKU : Full Form, Examples, Uses and Importance

What is SKU?

SKU is defined as a scannable bar code or QR code that is used by the vendors to track the delivery. These SKUs are printed on the order or parcel and are scannable using electronic devices. SKU plays an important role in tracking the inventory and depicting the delivery time. Generally, eight to twelve characters (a combination of alphabets and numerals) make up a SKU.

Key takeaways from SKU:

• SKUs enable businesses to look for and identify inventory from inventory counts, cycle inventory, invoices, and purchase orders.
• SKUs are commonly used in inventory control and inventory management systems.
• SKU numbers are made up of digits and letters. They generally contain eight to twelve characters and numerals, and each character has a meaning.

Full Form of SKU

SKU stands for Stock Keeping Unit. It is the barcode printed on various product labels to facilitate inventory tracking and management, identifying a specific product, and reconciling stock levels of each product. Furthermore, SKU helps in analysing the most profitable items, finding reorder areas, and saving clients time.

How Does Stock Keeping Unit (SKU) Work?

An SKU is made up of digits and letters. This alpha-numeric combination can be used to represent a product’s details such as colour, brand name, model number, and so on. Every firm has its own manner of manufacturing stock keeping units for their products. Following factors must be considered while constructing an SKU:

1. Every SKU must be unique and cannot be reused. In other words, each product must be assigned a unique SKU.

2. The Stock Keeping Unit must be kept simple and short. Keeping a lengthy SKU might be difficult for readers and may fail to operate in an inventory management system.

3. Space and special characters should be avoided at all means since they might be confusing to readers.

4. Alphabets that can be mistaken with numbers should not be utilised. Avoid using alphabets like O, I, and J since they might be mistaken with 0 and 1.

Example of Stock Keeping Unit (SKU)

Consider a particular product ‘a Smaller-sized pair of white Gucci Shoes’. For this category product, we can generate an SKU as follows:

WHT-SML-G12-GUCCI

Here,

• A dash (-) is used to indicate distinct product details.
• WHT related to the colour of shoes that is White .
• SML indicates the size of shoes .
• G12 indicates the model number of shoes .
• Gucci indicates the brand name .

SKUs make the shopping experience more efficient than before. Previously, clerks would have had to visually explore the rear stockroom and look for a specific model of shoes in the exact size and colour while shopping for shoes. Many businesses now have portable scanners that allow salespeople to verify back-of-the-house inventories by simply scanning a floor sample. Furthermore, SKUs considerably improve and increase online buying logistics.

Uses of Stock Keeping Unit (SKU)

1. Inventory Track : It allows users to simply track the inventory and determine the availability and total quantity of a certain product. As a consequence, consumers save time and avoid stockouts since they are able to quickly recognise the goods they need to restock.

2. Shrinkage Identification : These can even be used to track and identify inventory shrinkage, which is the total number of missing products that a firm is unable to sell.

3. Identification of High Profitable Products : It may even be used to track best-selling items as well as those that are not performing or are underperforming. It enables shops to focus more on top-selling products and less on or rather remove those that are not best-selling or underperforming.

4. Replenish Inventory Levels : Stock Keeping Unit can be used to refill inventory levels that is to determine reorder points for each product and eliminate the possibility of stock-out.

Importance of Stock Keeping Unit (SKU)

Warehouses and retail stores rely heavily on the Stock Keeping Unit. The following are some of the importance of SKUs:

1. Enhanced Shopping Experience : The Stock Keeping Unit helps consumers compare similar products based on attributes such as price, quantity, quality, production date, ingredients, and so on. SKU helps in data collecting during sale and also ssists in product identification.

2. Data Interpretation : The Stock Keeping Unit simplifies inventory keeping, making it easier for users to determine the quantity of particular products at any given time.SKUs allow merchants to collect data in order to assess product importance or to identify periodic and cyclical trends in their various customer categories. This data enables them to maintain inventory that corresponds to consumer behaviour trends.

3. Assistance to Customers: When a client requests a different product version, employees may scan a Stock Keeping Unit to quickly discover what is in stock, leading in improved sales performance and customer experience.

4. Inventory Management : The primary purpose of a Stock Keeping Unit system is inventory management. Retailers may handle stock storage and transportation with a single Stock Keeping Unit. They can utilise sales data to specify inventory levels and deadlines, which can serve as a trigger for starting or halting inventory reordering and exercising control.

Stock Keeping Units (SKU) vs Universal Product Codes

Basis	Stock Keeping Units	Universal Product Codes
Usage	SKUs are exclusively used internally for inventory management.	UPCSs are exclusively used externally.
Specification	The SKU should specify the product characteristics.	The UPC should identify the manufacturer. A UPC code lookup website will allow you to search for various UPCs (Universal Product Codes).
Method	A Stock Keeping Unit vary from one company to another. Companies create Stock Keeping Units  and each company’s creation method is different	UPCs or Universal Product Codes are the same for every company.

Benefits of Stock Keeping Unit (SKU)

1. Inventory Management: SKUs help businesses manage their inventory by providing a unique identifier for each product. Companies can avoid overstocking or understocking by managing stock levels using SKUs, which can result in increased costs or declined revenues. Furthermore, SKUs may assist businesses in monitoring sales patterns and reordering items as needed, ensuring that they always have the products their consumers require in stock.

2. Better Sales Tracking : Companies can use SKUs to track sales data for each product, such as the number of units sold, the average selling price, and the sales volume over time. This data is important to businesses that want to make well-informed choices regarding product pricing, promotions, and marketing initiatives. Companies can improve the accuracy and effectiveness of their sales tracking systems by using SKUs and companies can quickly and easily access sales data for each product.

3. Increased Efficiency: By offering a uniform and standardised method of identifying products, SKUs assist in limiting the risk of human mistakes. This allows employees to access the information they desire more easily, decreasing the time and effort necessary to manage products and enhancing overall productivity. Furthermore, through using SKUs to manage inventory levels, companies can more readily discover what products are in great demand, allowing them to better allocate resources.

4. Enhanced Customer Experience: Companies may use SKUs to swiftly and readily retrieve product information, increasing the customer experience and lowering the risk of consumer annoyance or unhappiness. If a customer inquires about a product , a customer care person may instantly access the relevant SKU to get information about the product’s availability, pricing, and shipping details. This can help in ensuring that consumers receive the information they want in a timely and correct manner, increasing their general level of satisfaction with the company.

5. Improved Supply Chain Management: SKUs can also help companies manage their supply chains more effectively, lowering the risk of stock shortages or stockouts. If a corporation utilizes SKUs to manage inventory levels then they can instantly identify which goods are running low, allowing them to buy more before they run out of stock. This can assist ensure that the company always has the products that its consumers require in stock, hence boosting overall supply chain efficiency.