If you’ve just started selling, you’re probably getting to know retail terms.
One that will make a regular appearance is Stock Keeping Unit, or SKU.
An SKU is a product code that you can use to search and identify stock on hand
from lists, invoices, or order forms.
It’s a term commonly used when talking about inventory management.
So, now that you know what an SKU is,
when is it most commonly used, and what for?
Let’s go through some of the key use cases together.
As you know, SKU is a term used in inventory management,
so it shouldn’t surprise you that you would use an SKU to track inventory.
Any product that your business receives will need to be properly tracked.
The SKU is used so you know exactly how much product you have.
Wherever you stock your products
this could be a warehouse or storage room
using SKUs greatly helps you identify stock availability.
Another important reason to use SKUs
is when your business needs to conduct stocktakes,
which are used to record exactly how much stock your business holds.
Your SKUs help you identify actual stock levels in your warehouse,
to match the stock levels you’ve recorded,
most likely in an inventory management system.
Oh, if you need one of those, we know a pretty good one.
Click the button at the top right corner to know more.
Now you know the importance of SKUs in relation to stocktakes,
a crucial aspect of any business
is the ability to identify and track inventory shrinkage,
which is the number of items a business can’t sell, or is missing.
The more detailed your inventory categorization with SKUs,
the easier it is to pinpoint where, and even how stock goes missing.
When stock levels are low, it’s time to replenish your inventory.
Adding an SKU to every variant of each product
is good practice for identifying the quantity of the products you have on-hand.
This way, once you’ve set a threshold limit alert
within your inventory management system,
you can make a new purchase order.
Carefully setting your reorder point means
you only order when you need,
minimizing inventory holding costs.
Finally, using SKUs to track product variants in detail
plays a big role in helping you spot
which product variants are your best sellers.
This has a direct effect on your profit margins,
and is a crucial factor in aiding you with strategic product decisions
that will help grow your business.
Now that you know the importance of using SKUs,
it’s equally important to use them properly.
A common practice is to split an SKU into parts:
the first part could be used for product grouping,
while the other part might be used to identify a unique value
like a date, or color of the product.
It’s also best to use an alphanumeric system for your SKU tracking,
to avoid any clashes with your spreadsheet
or inventory management system.
So, that’s it!
I hope you’re now equipped with the knowledge and confidence
to start managing your inventory using SKUs as the tracking system.
As always, for further information on all things inventory management and eCommerce,
head over to the TradeGecko website.