So, what is an SKU?
Pronounced as “skew,” SKU stands for Stock Keeping Unit. SKU code refers to a specific product, item or service that is kept for sale.
This code is made up of a particular character and is unique for every piece. The figures vary according to different parts of the product giving a unique identity to it.
The difference between an SKU code and a barcode is that an SKU code can be read and understood by persons.
The greatest benefit of SKU codes is that they enable firms to take a more accurate reading of stocks which not only saves time and money but also provide efficiency in the process.
SKU in retail terms
As mentioned before the most significant difference as well as an advantage of SKU code over barcodes is that it can be deciphered with ease.
For example, if you are a retailer selling products from the manufacturer, there might be a possibility that the manufacturer will change the barcodes. This might create confusion and error. But with SKU codes are specific to the size, colour, and shape of the products making it unique regarding your dealings.
Where are SKU codes used?
With its increasing popularity because of advantages which include better inventory management as well as its readability by humans, SKU codes are being widely used in Catalogues, E-Retailers, Product fulfilment centres, Retail stores, and Warehouses.
Each retailer or business creates a unique SKU code for its products and services.
How are the SKU codes formed?
Online retailers such as Amazon.com display items and products in the form of “suggestions” to you by making use of SKUs. Companies attach a unique SKU to each of its products which have all the identifying features of the item.
This means, for example, if you are looking for a television, the company can not only show the T.V. you are looking for but also other ones with the same features using SKU information.
Many systems help to create your own SKU architecture or more precisely, a hierarchy depending on your preferences. It is essential that you will take into account what you want and then create a comprehensive system for your catalogue.
The chances of you tracking beyond your classification are not too high if you are an independent reseller.
The core function of an SKU code is inventory management as well as improving customer satisfaction. The time consumed by the customer to select items is significantly reduced when products are assorted electronically.
In this highly competitive age of online marketing, SKU codes prove to be very advantageous in advertising. It also helps retailers to protect their margins as well.
Why is SKU so important?
SKU codes are becoming so much important right now because, with them, a retailer can keep track of his inventory as well as sales with more detailed and efficient reporting. These reports can be shared by the retailers among vendors for negotiating better prices and terms.
Apart from other advantages, SKU codes can be used for better advertising. SKU retailers don’t have to compete with their rivals’ costs because with these codes people can determine whether the models they wanted are the ones being displayed. This helps in reducing the practice “showrooming” in stores.
Another importance of SKUs is informal stocktaking. These ensure that the stock levels in a warehouse match the recorded stock levels in the inventory management system.
Each product you are selling must have a unique SKU code which makes organizing and identifying items off your items very simple and straightforward.
Identifying shrinkage is another vital function of SKU codes. Inventory shrinkage is one of the essential practices in retailing which means the number of items that cannot be sold or are missing.
Goods can get damaged or stolen along with the supply chain. Intelligent and careful inventory categorization through SKU codes can help track the assets which were taken which reduces the possibilities of theft.
SKU codes help in renewing inventory.
For small business owners, managing vast quantities of stock can be nearly impossible. But by assigning SKU to each product can help businesses to know which all products are in hand. A threshold limit (reorder level) can be set for products which will indicate when to make a new purchase order.
With SKUs, you can not only keep better track of your inventory but also cut down holding costs for inventory.
As mentioned above, SKU helps in the better arrangement of inventory which also improves in the identification of profits by tracking product variants. These reports determine which product modifications are providing the most profit and which ones are not performing as expected. This gives retailers a clear picture of significant streams of profit helping them to make intelligent and planning decisions to grow their businesses.
Difference between SKU and UPC Barcode
Even though most customers use the terms SKU and UPC very commonly, it is essential that business owners, as well as their employees, understand the fundamental difference between the two.
It can be said that SKU codes correspond to a particular company, i.e., these codes are internal inventory codes which will be unique to the company.
On the other hand, UPCs are standardized universally and can be used by any company. These barcodes are external tracking codes for products.
Although SKU codes and UPC barcodes are different, they have many uses that are similar and are best in their ways.
Understanding SKU codes and their usage
Many of the points discussed above can make one understand what SKU codes are and what are their uses. These are alphanumeric codes assigned to each product by retailers so that they can keep a better track of their inventory.
SKU codes can not only be attributed to physical products but also to intangible products such as various services that can be billed.
In short, SKUs can be assumed as codes that are assigned to retailer company’s billable commodities.
The characters present in an SKU code can show information about a product such as its manufacturer, size, colour, cost, the location of its warehouse, etc. SKU codes can vary in length depending on how much information one can get from it, but most SKU codes have 8 to 12 characters.
Understanding UPC barcodes and their usage
UPC barcodes stand for “Universal Product Codes” and were first used in 1974 for helping retailers to track products. These are 12 digits long and can be read only by a UPC code-reading machine.
These codes are administered by an international organization called the GSI which have branches in every country. If a UPC is assigned to a commodity, it remains the product’s code throughout its shelf life.
Even if multiple businesspeople sell the product, it retains the same UPC code, unlike SKU.
No matter what solution you use for better management of your inventory, it is imperative that you understand the difference between SKU codes and UPC barcodes.
Both of them have their advantages and disadvantages, but in this growing economy with a vast number of retailers in the market scene, SKU codes come in handier for better inventory management.