Storage and Inventory Management with SKUs

SKU (pronounced skew), or Stock Keeping Unit, is a term that is used when talking about inventory management. Storage and Inventory Management with SKUs allows use of a unique series of characters relating to an item or product.

Universal Product Codes (UPCs, or barcodes) are exactly that – universal. A UPC is unique to the product, whereas an SKU is unique to the company. Unlike barcodes, SKUs aren’t universal, meaning each retailer can create their own set of SKUs for their particular range of products.

Two identical t-shirts will carry the same barcode whether you buy them in Edinburgh or London, but if these come from different companies the chances are they will have different SKUs attached to them.

SKUs use both letters and numbers, whereas barcodes are made solely of numbers, meaning one of the benefits of an SKU is that it can make the product easily identifiable. Below are example UPCs and SKUs for an item of clothing.

856985448563  or  TSHIRT-LNGSLV-GRN-XL

Not only is it immediately obvious that (2) is an item of clothing, it also gives you item specifics such as the style and size. It is a lot easier for warehouse staff to differentiate SKUs than barcodes, meaning they can streamline the picking process and any room for error is minimal.

Storage and Inventory Management with SKUs

Items in a warehouse will be stored according to type; t-shirts will be with t-shirts, jumpers with jumpers and hats with hats. Setting up your SKUs in accordance with the example above (2) will mean that warehouse staff can immediately identify which main item they are looking for, then they can make sure they pick the correct variation.

SKUs are the easiest way to keep track of your product variants; you can report not just on the main product line but also on each individual variation. These reports can help you determine which variations you might want to invest more in and which you might think about discontinuing.

Adding a SKU to every variation of product means the stock levels are easily known. You are then able to set a threshold limit that indicates when stock replenishment of any given item is necessary. The table below is a good example of this. Figure 1 shows that you have 47 green t-shirts in stock, whereas Figure 2 breaks these 47 down into individual sizes, meaning you’ve got a much better grasp on exactly what stock you’re selling and what needs replenishing.

_{Figure 1}

_{Figure 2}

Inventory stock takes are carried out to ensure the physical stock levels match the stock levels within the internal system. Giving each product variation its own unique code makes stock reconciliation much more straightforward.

In Summary, SKUs are:

• Easily understood by humans and show product variations in an obvious way.
• Adaptable and extendable, meaning if you widen your range you can easily create new codes in the same format.
• For accurate stock keeping – which improves order fulfilment – which means happy customers!If you are a start-up company and will be looking to increase your range at a later date, think carefully about your codes. For example, you may have one range of green t-shirts at the start, and at a later date add another green t-shirt. Think about what makes the t-shirt unique; it could be a logo or a variation of green, such as Mint Green or Forest Green. This saves the SKUs having to be adjusted later down the line, therefore keeping your costs to a minimum.There are even SKU generators online, but they’re not hard to come up with if you know your products. When you’re thinking of outsourcing your fulfilment, having a basic understanding of SKUs will give you a head start when it comes to getting the ball rolling.