What Is a Stock Keeping Unit (SKU)?
Let me tell you directly: a stock-keeping unit, or SKU, is essentially a sticker you attach to a product to help track your inventory as a retailer. This sticker has a unique series of digits and a scannable barcode that captures all the necessary info when someone buys the item.
Those digits pinpoint the product itself, its price, who manufactured it, and where it was sold. You can even use SKUs for things that aren't physical products but still billable, like hours of work in an auto shop or extended warranties.
Key Takeaways
You'll find SKUs in use across retail stores, catalogs, service providers, warehouses, and fulfillment centers. As a retailer, you rely on them to restock items as they sell out. Plus, the data from SKUs lets vendors monitor where an item is during shipping.
Tracking Inventory
SKUs serve stores, catalogs, online sellers, service outfits, warehouses, and fulfillment operations to keep tabs on stock levels. When a customer purchases something at the point of sale, you scan the SKU, and your POS system automatically deducts it from inventory while logging details like the sale price.
With scannable SKUs and a solid POS setup, you as a manager can easily figure out which products need reordering.
Important Note
Remember, SKUs aren't the same as model numbers, though the model might be part of the code. You create your own unique SKUs for the products you sell in your business.
Vendor Benefits
- Track Inventory: SKUs let you see what's in stock, monitor how inventory moves, and set points for reordering.
- Prepare for Sales or Seasons: Use SKU data to decide what to reorder ahead of holidays or promotions.
- In Transit Data: SKUs provide info on an item's location during shipping.
SKUs vs. UPCs
Since each company makes its own SKUs for inventory tracking, the codes for the same product will differ between businesses. This makes it tougher for shoppers to compare prices across retailers—if one store advertises a discounted fridge by its SKU, you can't just use that to check competitors' prices.
On the other hand, universal product codes (UPCs) stay the same no matter who sells the item, so they're great for comparisons. A UPC has a barcode and a 12-digit number identifying the product.
How Do I Distinguish an SKU From a UPC?
Both are labels on products with barcodes and identifying characters, but here's how you tell them apart: a UPC shows 12 numbers only, no letters, while an SKU typically mixes numbers and letters with varying lengths. The UPC identifies just the product, but the SKU identifies the product and its specific retailer.
How Are SKUs Used in E-Commerce?
If you're selling online through platforms like Amazon, you can create and apply your own unique SKUs to track sales and inventory for your products.
What Does Economic Order Quantity Mean for Vendors?
Economic order quantity (EOQ) is the optimal number of units you should buy to meet demand without inflating inventory costs. You set an EOQ to get alerts when it's time to reorder a product.
The Bottom Line
At the end of the day, you need to track your inventory to understand sales volume, restocking needs, and product turnover rates. Implementing SKUs streamlines this process and allows for some automation in managing your stock.
