What is a SKU and How do I Make Them for my eCommerce Store?
Running an eCommerce store presents many unique challenges, from attracting customers to efficiently handling fulfillment. One important thing that every eCommerce business needs to know is what a SKU is and how it can help them properly manage their store inventory. In this blog post, we’ll explain what SKUs are and how they work, as well as provide helpful tips on creating your own custom SKU codes so you can better organize and track your products in your online store.
What is an SKU?
SKU stands for Stock Keeping Unit, unique identifier retailers use to track products throughout their supply chain. Every product in stock at a retail store will have its own SKU, which serves as a method of cataloging items in the inventory. The combination of letters and numbers assigned to each SKU acts as an individual barcode.'
In addition to being used by retailers, manufacturers also use SKUs when producing products or services in large batches; this allows them to monitor what components go into each item and helps with cost tracking. For example, suppose you're buying a computer online from Dell. In that case, you'll see that the company has assigned it an individual SKU code, making it easier for them to track production costs associated with the product throughout its lifecycle.
SKUs make life easier for retailers and customers alike; they provide businesses with an easy way of tracking inventory and give consumers more information about items before purchasing them. By reading through a product description bearing an SKU number, consumers can identify exactly what type of product they're dealing with – meaning less time spent comparing items across different stores!
Why you need SKUs for your eCommerce Store
Using SKUs (stock-keeping units) is vital to effective inventory management system for eCommerce stores. SKUs offer several benefits, including:
Improved Efficiency
Assigning each item in your store with a unique SKU number makes it much easier to keep track of the things you're selling and ensure that all products are correctly accounted for in your inventory. This helps reduce human error and improve accuracy when tracking orders, counting stock, or carrying out other tasks associated with running an e-store.
Easier Order fulfillment
A transparent system of identifying products makes locating an item from within your warehouse or fulfillment center easier when an order is placed online. Instead of searching through long lists by hand looking for matches, automatic systems can quickly find the product based on its SKU code and get it ready for shipping faster than manual methods would allow.
Reduced Costs
With streamlined inventory processes enabled by SKUs comes cost savings directly (due to the improved efficiency) and indirectly (if customer service inquiries are reduced due to fewer errors). Fewer mistakes can result in less time spent sorting them out and lower overhead costs from sending replacement items or offering refunds due to wrong orders being sent out - resulting in greater overall profitability over time!
Related: Backorders vs. Out of Stock- Things to Know About Keeping Items Available
How to Create SKUs for Your Products
Creating SKUs for your products is an essential step to effectively tracking and managing inventory. A stock keeping unit SKU, is a unique numerical identifier given to each product in stock that can be used to distinguish it from other items. Here's how you can create SKUs for your products:
Use descriptive information
The simplest way to create a unique product identifier is by including descriptors such as brand or model name and size in the SKU code. This helps establish a clear connection between the item on the shelf and its associated data entry when ordering, receiving, and stocking inventory records.
Keep codes concise
Ensuring SKUs are no longer than 8 characters (including letters) helps keep the database clear, so there are fewer errors when updating information about products in real time. You want clarity around which items should be tracked with specific codes; this could lead to misplaced orders or wrong shipments of goods if they aren't adequately accounted for within the system with carefully created product identifiers!
Log everything into an organized system.
Setting up a systematic record-keeping system ensures that every detail gets included in your database. Every single item needs an assigned code to be accurately tracked against its corresponding data entries across multiple channels like online sales platforms and physical stores! This way, you'll always be able to locate what you need when customers come looking for something specific on their end too!
Choosing SKU Names
Now that you know what SKU means, the next step is to assign SKUs to your products. There aren't any strict rules for naming SKUs, but you can use these guidelines to help create the best product SKU numbering system for all the products you sell.
It is an excellent idea to establish a standard format when naming SKUs. An SKU typically contains a string of letters and/or numbers that work as a code to designate specific product features and variations.
For example, you might decide that the letter B in an SKU stands for the color blue, and that "color" is always the second piece of the SKU. An example is a pair of women's blue jeans in size 8, which could have an SKU that reads: WM-B-JNS-8.
The same seller might have a men's green sweatshirt in size medium for sale with an SKU that reads: MN-G-SWT-M. In this example, the second piece of the SKU also contains the color, using "G" for green. All products this seller sells should follow the same format and use consistent abbreviations.
You don't have to go wild, thinking about what makes each product unique. Stick to basic product features like department, item type, size, variant, and manufacturer name, for example.
As the seller, you will choose the order of the SKUnumber system and letters in the SKU sequence. For example, a Nike blue jacket in size large might have the SKU sequence: NK-J-B-LG. In this example, the seller decided that Nike is always abbreviated to NK, J stands for a jacket, B stands for the color blue, and LG stands for size large.
Again, using a consistent format for all SKU system makes conveying information across departments easier. The seller above used the format: manufacturer name-item type-color-size. Any other products the seller has listed for sale should follow this format.
To make this easier, create a list for what each SKU number examples or letter stands for in an Excel spreadsheet. To start, you might generate a list of brand names with corresponding abbreviations. For example, you can decide that Nike is NK, Adidas is AD, Puma is PU, and Reebok is RBK. Next, do the same for other product features like department (men's, women's, kid's), product type, color, size, and more, if they apply.
Next, you will use the list of abbreviations you just created to create SKUs for all your products. Like our seller above, decide on a consistent format (ex. manufacturer name-item type-color-size). Each product gets its own SKU that can be entered into inventory management, sales, and warehouse software.
Warehouse staff and other departments should be trained to know the SKU format you have chosen to use. That way, all workers can look at an SKU number and know which product it corresponds to quite easily.
Pro tip: Don't start SKU numbers with "0" since some data software and spreadsheets ignore them altogether. Ex. 0NKJB3 might be incorrectly read as NKJB3.
Tips for Managing Your SKUs
Stock Keeping Unit SKU are an essential part of inventory management, playing a critical role in the success and growth of your business. As such, it is necessary to have an effective SKU management strategy in place. Here are some tips for managing your SKUs:
Analyze Your Existing Inventory
Before investing in additional SKUs or changing existing ones, evaluate which items tend to sell well and what should be removed from the inventory. This will help you make informed decisions about changes in the future.
Keep It Simple
Too many SKUs can create confusion if managed poorly — instead focus on creating a few "bread-and-butter" products that meet the needs of most customers, with variations for special orders or preferences as needed. This helps ensure that it is easy to keep track of all units effectively across channels and locations.
Automate Where Possible
Take advantage of modern technology when setting up your system by automating tasks whenever possible and integrating order management system software with sales systems so you can track every item quickly and easily in real-time — this helps reduce errors associated with manual entry work while ensuring accuracy across channels at all times!
Utilize Assorted Data Sources For Tracking
Integrate data from multiple sources into one central hub where you can store information related to each SKU, such as pricing history, demand trends over time, etc.; this will provide insights on whether specific products need to be discontinued due to their low performance–helping manage resources more effectively while eliminating unprofitable items!
Leverage Software Solutions
To gain control over your stock-keeping practices, take advantage of specialized software solutions like Oracle NetSuite Advanced Inventory which provides detailed visibility over inventory movements as well as tools to optimize stocking procedures according to demand patterns, among other benefits –this type of solution could save time & money down the line!
SKU FAQs
How do I know if an SKU is working?
Knowing if an SKU (Stock Keeping Unit) is working is essential in managing inventory. Here are some helpful tips to determine if an SKU system is working:
Analyze sales performance
You should compare your SKU sales figures over periods to see if they're trending in the right direction. This will help you track each product line's performance and determine if a particular SKU needs more attention or marketing support.
Monitor stock levels
Monitor your stock levels periodically, as this can indicate how well sales are going for every specific item. If certain things aren't selling, then it's likely that their associated SKU code need adjustment or elimination from your inventory list altogether.
Analyze customer feedback
Keeping up with customer feedback and reviews can give you insight into which products customers want more of and which may be losing their appeal among your buyers base - providing clues as to what items may not be necessary moving forward based on product popularity and customer demand trends etc.
Compare prices with competitors.
Regularly check competitor pricing against yours, especially when updating list prices for existing lines - this will ensure that your prices remain competitive while simultaneously offering value to potential customers. Doing so will ensure customers are still incentivized to purchase from you rather than elsewhere due to savings, promotions, etc.
By considering all these factors, it'll become easier for you to know whether or not a particular SKU code is worth keeping around in the long term, naturally aiding profitability while preventing costly stock wastage over time!
What are some common problems with SKUs?
SKUs (Stock Keeping Units) track individual products within an inventory system. Common issues associated with SKUs include:
Poorly defined numbers: If the SKU number examples are well-defined, it becomes easier for retailers to track and identify each product accurately. This can lead to incorrect stock levels and missed sales opportunities.
Lost or inaccurate data: With proper organization, data related to specific SKU code can be recovered. This could mean mislabeled items or incorrect pricing information when entering the item into an inventory system or during checkout at a store register.
ID errors: If two different items have a similar SKU number, they may get confused or accidentally sold as one item instead of two separate ones during checkout at stores, which could result in customer service issues, disappointed customers, and lost revenues due to returns and refunds if discovered later on by either the store clerk or customer themselves after making their purchase (e.g., realizing that they only received 1 of 2 items purchased).
Tracking multiple versions of a product - Different SKU variations of the same product may have slightly different formulas or packaging sizes that require unique identifiers so that you know exactly what you're selling from your inventory perspective without confusion from customers asking which version it is when purchasing online as well as mix-ups between shipping/receiving departments who may think one version is another due to similar exterior appearances but having completely different contents under the hood once opened up for inspection before being stored away in inventory shelves (e.g., regular vs. sugar-free sodas).
How can I improve my SKU system?
Improving your SKU (Stock Keeping Unit) system is essential to streamlining your inventory management and sales operations. Here are some steps you can take to make sure your SKU system runs optimally:
Establish clear criteria for each unique SKU ode in the system - Make sure you define each product's uniqueness, such as type, size, color, or any other attributes that identify it from another item.
Segment products into meaningful categories: Grouping items together by their respective categories helps to clarify how these items will be managed throughout the warehouse and retail settings where they may end up being sold.
Implement a consistent numbering system: Numbers should be easily identifiable across different locations. Hence, there is clarity in understanding which products belong in which section of stock rooms and store floors. It's also essential to ensure that numbers are consistent with existing models established within the company or across relevant industries worldwide. Hence, there is no overlap when entering information into databases or product labels/tags that may require unique identification numbers for tracking purposes later on down the line.
Invest in better technology - Technology investments are critical when it comes to properly managing a comprehensive SKU system since they enable companies to track data more accurately and keep track of inventory levels better than ever before; this includes onboarding systems like ERP tools which help manage both internal processes like order fulfillment while also automating external aspects related to vendors' activities such as ordering materials from suppliers or shipping orders out much quicker than humanly possible through manual methods typically employed by most businesses today! Handling all parts of managing inventory efficiently has become much simpler thanks to advancements recently made, which could ultimately translate into increased profits if handled correctly!
How do I update an SKU?
Updating an SKU (Stock Keeping Unit) is an integral part of inventory management and can help to streamline your operations. In its simplest form, an SKU is simply a unique product identifier used to track stock items in-store or online – you'll commonly find it as the last couple of digits at the end of item numbers.
When updating SKUs, several vital steps should be taken:
Review current inventory: Before changing your existing SKUs, review your current setup and identify areas that need improvement. For example, ask yourself if an item has multiple components with different characteristics (dimensions, colors, etc.). It may be beneficial to break these into separate products and assign them individual SKUs for better tracking capabilities.
Create new & delete old - Using data from Step 1 above, create a new 'clean' SKUS that best describes the items in question without being overly complex or difficult to remember/recognize when recording sales transactions. At this same time, you should also delete any redundant or unnecessary entries from beforehand.
Ensure accuracy: Once all new & updated unique SKU code have been created, each value must be recorded accurately within both back-end databases & online storefronts (if applicable). Doing this will ensure accurate product identification moving forward.
Implement changes - The final step involves pushing out new & updated values across all appropriate systems, such as ERP applications, payment gateways, etc. This ensures everyone involved in the supply chain, including customers, can access reliable data quickly and easily whenever necessary -- reducing potential miscommunications.
Nearly the same SKU number except for one number that's different due to the color variation. In any case, the seller assigns the SKUs to products and creates them in ways that make the most sense for business operations.
SKUs Vs. UPCs
The Universal Product Code (UPC) is another identifying factor associated with merchandise. However, there's a notable difference between UPCs and SKUs. Whereas SKUs are seller-dependent, UPCs remain the same even when various merchants offer the respective products.
Also, whereas SKUs can have any number of letters or numbers depending on a merchant's identification system, UPCs comprise 12 numbers and include barcodes.
Related: SKU Vs. UPC: What is the Difference?
Using SKUs to Determine the Key Profit Generators
As explained in the example above, SKUs can contain information about a product's color. It might also include the manufacturer's name and a product's size or style.
By keeping track of the most in-demand SKUs, the employees from online stores can reliably know which products customers buy most often instead of the less popular products. Then, based on SKU trends, an individual in charge of replenishing the stock might decide to purchase fewer of the products that don't sell as quickly compared to the most-desired items.
Improving Vendor Communications with SKU Numbers
As SKUs are primarily used internally at online stores, customers and vendors may never see them. However, online merchants can still rely on SKUs to have smoother communications with vendors.
For example, SKUs are helpful in forecasting. A valid sales forecast can set expectations for anticipated demand, allowing online merchants to check with their vendors and ensure they can meet minimum requirements. If they can't, it may be necessary to start working with additional suppliers.
Moreover, SKUs help employees gauge how particular fast items usually sell. They can then talk about timeframes with their vendors and reduce the likelihood of shipments arriving late.
Using SKU's to Speed-up Inventory Tracking
If thousands of items in the warehouse are associated with an online store, it becomes almost impossible to track inventory quickly without making errors. Because SKUs include an alphanumeric system that the people working for your business should understand, they facilitate accurate stock-taking and reduce many of the challenges associated with warehouse logistics.
Inventory tracking is one of many things that help prevent backorders — the condition whereby products sell out. By conducting stock counts with SKUs' help, online retailers get accurate pictures of what's available to sell.
Merchants can also do full inventory counts, which involve counting every product on hand. It's necessary to close the shop at a physical store during business hours or hire a team that can take care of the job during odd hours. Fortunately, that doesn't apply to a business operating only online.
The other option is to do a cycle count —focus on only a small section of inventory to count every day, and repeat the process to address all items in a store. A cycle count allows merchants to stay on top of inventory tracking without substantial disruptions to operations.
Conclusion
In conclusion, SKUs are a must-have for any eCommerce business as they give store owners the ability to manage better and track their inventory. On top of that, creating customized SKUs specific to your store allows you to create an organized system that is easy to understand and use. Although assigning an SKU code can seem daunting, with the right resources and knowledge, setting up efficient SKU codes for your eCommerce business doesn’t have to be complicated. To help take some of the burdens off your shoulders when managing fulfillment services for Amazon orders, contact Simpl today, and let us help streamline your order fulfillment process. So consider investing time into creating effective SKUs. Remember—with a few simple steps of planning and being organized from the start, you can ensure a smoother flow for your eCommerce business operations.
Recommended: What Is Amazon ASIN?
