What is sku numbers ?
SKU numbers have been part of the retail industry for years. These product codes are primarily used to identify specific items in order to track and manage stock levels, production costs, inventory, and more. With the help of SKU numbers, retailers can easily keep track of the number of items they sell daily and which items need replenishing. This article will give you a quick overview of how SKU numbers work and their significance in the retail industry.
Sku Numbers- Powerful Numbers That Can Make or Break Your Business
What is an SKU Number?
An SKU number is an alphanumeric code of roughly 8 characters that is assigned to products. They are scannable bar codes, most commonly printed on the product labels, and are often differentiated in terms of categories to classify the variations of a single product. They help retailers track price, manufacturers, and other product details and aid inventory management by providing concise sales data. An SKU number is not limited to tangible products alone and may be ascribed to services and warranties.
There are several product numbers and therefore, it is essential to distinguish an SKU number from other numbers associated with inventory management such as serial numbers and universal product codes (UPCs). These numbers are designed to help sellers identify products and are not intelligible to machines.
SKU vs serial numbers
Serial numbers are unique numbers most often assigned to individual pieces of hardware or software, though, they are widely used in banknotes as well. They are primarily used to track information about the ownership of the product as opposed to SKUs that are used by retailers to track each item in the stock. Let's use an example to illustrate the difference- If you sell iPhone13 in the same colour, all of your stock of the phone would have the same SKU number but a different serial number. So, if your customer encounters an issue with the hardware, you will be able to quickly identify the model.
SKU vs UPC
Universal codes usually contain 12 digits which run along the bottom of the barcode. As the name suggests, these numbers are universal, which is to say that they can be read by anyone with a barcode scanner. This number, unlike an SKU, is not unique to a retailer. In other words, if two retailers are selling the same product, they will both have the same UPCs but different SKUs.
What is the purpose of SKU numbers?
The main purpose of SKU numbers is accurate inventory tracking and to function as a top-level identifier for the products that need to be restocked while also giving retailers an objective overview of the products that are not doing well. On the one hand, they ensure that retailers never run out of their hot-selling items, while on the other, SKU numbers enable them to manage losses and make smarter decisions. Keep reading to find out everything need to know about SKU stock keeping.
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How are SKU numbers important for your business?
Simply put, SKU numbers ease inventory management, making them a vital addition to your workflow. They help identify the products that need to be restocked, record sales and losses easily, enable you to make better inventory decisions and trace every item's location while offering precise information regarding inventory and sales activities.
SKUs allow you to analyze the cost of each product in your inventory so that you can ensure that each item meets the financial goals of your business.
The product code is scanned at the time of sale, and the point-of-sale (POS) system instantly removes the item from the inventory. This automatically updated sales data allows retailers to track items popular with customers.
Since SKU numbers help reveal details of each product, such as colors sizes, product price, and manufacturer, they make it easier for retailers to track their inventory through the supply chain and revert to customer queries quickly.
They are also useful for customers looking for other items with similar characteristics. For example, when a customer purchases a book online, retailers can display similar titles that other buyers might have bought based on the SKU information. This could encourage the customer to make additional purchases, thereby increasing the company's revenue.
Tips for using SKU numbers effectively
While SKU numbers are useful stock level identifiers, proper management is crucial in solving inventory-related problems. When used effectively, SKU numbers can optimize your inventory levels and lead to greater profitability. Here are some tips that will enable you to make the most of SKU numbers. The tips below will use SKU numbers effectively-
Automate your SKU management- Managing SKUs manually can be quite tedious. The best way to administer SKUs is to automate the process through inventory management software with barcode scanner such as Zipinventory. Zipinventory Features will allow you to track and update your inventory in real-time while helping you execute a more efficient purchasing process. Automating SKU management will also reduce costs and enhance data accuracy.
Create SKUs with letters- Letters provide a visual cue that allows product codes to stand out in a document otherwise filled with numbers. When a product code begins with alphabets, it immediately tells the manager that this is a new SKU number. A related tip would be to avoid usingletters look similar and could be confused with numbers. For example, an I could be mistaken for 1, or an S could be read as 5.
Avoid using dashes, 0s, or periods- While special characters and punctuations can be added to SKU numbers, it is best to avoid using them as they may cause issues while printing barcodes. It is also not advised to start an SKU number with a 0. This is primarily as some data storing software might read the first 0 as nothing. For example, if the SKU number is 096514, the software might read it as 96514.
Avoid using manufacturer numbers within your SKUs- It is generally advised that retailers should refrain from using manufacturer numbers within their SKUs to avoid confusion. SKUs are unique to every business and even within businesses, to every product. These unique SKUs are the easiest way to avoid any confusion by putting a set formula for creating SKUs in place.
Make your SKU numbers concise- It is truly advantageous for business owners to be able to generate SKUs. However, it is important that you don't overload them with information or meaning so as to end up with a 27 digit-long SKU number. One of the best practices to create SKU numbers is to pick 2 or 3 of the most relevant aspects of that particular product. It is better to drop some information about the product for the sake of ease and fitting the numbers on your tags.
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Major benefits of using SKU numbers.
Establishing an efficient SKU system is key to tracking inventory. It is an essential tool to determine how many more items you need and oversee what you have available. In addition to this, there are several other advantages of implementing a good SKU system. Some of these include-
Setting up reorder points- By allowing you to put reorder points in place for each product, SKU numbers enable you to be aware of the stock you need to reorder constantly. Setting individual reorder points for your stock items will make sure that you never run out of your popular items, nor will you bear the unnecessary costs of surplus stock. Keeping an eye on which products are selling well will also help you decide which to invest in further and which to discontinue.
Optimize your inventory- The more information you have about your inventory, the better decisions you will be able to make about future purchases. SKU numbers allow you to control stock levels and manage product movements. This way, all your inventory-related decisions will be driven by accurate and real-time data. Because SKU numbers are specific to products and their variants, they also help you gauge what your customers want. This makes it easier for businesses to cut costs and stay within stipulated budgets. Implementing a good SKU system is essential for inventory optimization as it allows you to identify slow-selling items and reduce the cost associated with overstocking.
Reduce chances of theft or unscrupulous activities- Warehouses are filled with products that are constantly moving. In such a scenario, missing items can easily be overlooked, and many businesses face the problem of inventory shrinkage. creating sku numbers helps with this issue as it gives you greater control over your inventory and allows you to track the movement of individual products and their variants. This makes it significantly more difficult for items to be lost or stolen.
Sell on multiple channels- An advantage of online retail is that it allows customers to browse through a retailer's in-store inventory to choose their pick. Sellers can display their products on Google without manually entering their inventory data. A good SKU system that facilities this will allow you to sell your products on multiple channels.
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Why do you need a good SKU number?
All businesses, particularly if you are a small business or an ecommerce business that retails their products and services on the web, need a good SKU system to recognize and track their inventory, and its variants, easily and efficiently. SKU numbers also enable you to make informed decisions about future investments and strategies to cut losses. SKUs are unique as they are product-specific and differ from other product identifying numbers such as serial numbers and UPCs that serve other uses. In a nutshell, these are some reasons why businesses construct a sound SKU architecture, which is simple and easy to read and access.
How to Calculate Your SKU Number
While SKU numbers can be calculated in myriad ways, the most efficient way of creating an SKU architecture that works for your business is through an inventory management system with features such as a wireless barcode scanner, barcode scanner website, barcode scanner application, barcode scanner android, among others.
Each section of the SKU code should detail the most significant aspects of the product or service on offer. These codes can be arranged in unique ways to refer to particular items. For example, a kids' sweatshirt could be written as K234-02, while a men's sweatshirt could have the SKU code M145-14. When SKU numbers are arranged logically in this way, it becomes easy for the salesperson to understand what item the code represents.
The length of the SKU code is up to their retailer but while creating them, it must be kept in mind that their salesperson should be able to read and sometimes even remember them easily. You can also choose just numbers or letters or create a combination of both. While you can pick these letters or numbers randomly, it is usually advised to insert some meaning into your codes, as illustrated above.
Digits can be segmented to refer to certain characteristics of the product or service on sale. If you go for an 8 digit SKU, the first two digits could indicate the item category, the next two digits could refer to the subcategory, while the next two could reference the color of the product, and the last two digits could be the product's unique identifier.
If your inventory is limited or simple, you might need to specify only the category of the product. This would reduce your SKU number to 6 digits as you no longer need to associate two digits with a subcategory. The rest of the code would then be a sequential number that reveals other product or service features. In this way, you can use the above-mentioned architecture to calculate SKU numbers and improvise according to your inventory and needs.
While there is ample room to construct an SKU system and calculate numbers specific to your business, they must be created in sequential order. In this way, the next item will be assigned the next available number. There are chances that your inventory might be more complicated. In such a scenario, it might be useful to add information about the supplier, store location, and the department along with the usually mentioned details of item type, color, size, and variation. These pointers will help you calculate SKU numbers efficiently and construct an SKU architecture that eases inventory management for you.