What is SKU & How to Generate SKU Numbers?

What is SKU & How to Generate SKU Numbers?

Rhema Hans
Rhema Hans
Table of Contents
Table of Contents

Organization and orderliness are the keys to running a successful business.

However, should it be limited to your workforce? Not really.

Along with your employees, your inventory should be equally organized and managed systematically. Considering, you are not just dealing with a product or two but a variety of them in different brands, sizes, quantity, quality, & so on. And it is neither practical nor always possible to keep all the details tied to your memory.

What if you had someone who could remember the product details for you?

A Stock Keeping Unit (SKU) can do that for you and much more, making inventory management a lot easier. Let’s find out what are the benefits of an SKU and why you should have it. But before we get to the benefits of SKU, first take a closer look at the meaning of SKU.

What is a Stock Keeping Unit Number?

As a business owner, you have a lot of money invested in the raw materials and stocks. Hence, it must be your priority to track your inventory carefully and manage it efficiently. And a Stock Keeping Unit does that for you.

An SKU is a unique number or code allocated to each product that differentiates it from the other products in the warehouse. It makes it easier to track the product and keep a record of the products.

Another popular acronym that often gets mistaken with SKU is UPC. i.e., Universal Product Code. While both of these have similar functions, they fulfill different purposes. We shall take a quick look at the differences between the two in the next section.

SKU vs UPC (UPC Barcodes)

Today many business owners use the terms SKU & UPC interchangeably. However, it is essential to be familiar with the differences between the two.

  • While the SKU numbers are inventory codes novel to a specific company, the UPC barcodes are product tracking codes that are patterned for universal use by any company.
  • Another difference between SKU & UPC is, SKU codes are alphanumeric, and UPC barcodes are numeric. The size of a UPC shall always be 12 digits. However, the length of the SKU number is to be given by the company.
  • Companies practice the freedom to create their own SKU code, whereas UPC numbers must be licensed and purchased by Global Standards 1.

Now that you have noted the difference between SKUs, and UPCs let us take a closer look into the benefits of SKU as promised.

6 Benefits of SKU in Inventory Management

With more power comes more responsibility. With SKU comes a competitive edge you do not want to miss.

Here are the top 6 benefits of SKU:

Accurate Inventory Details

As your every penny is tied in the inventory, you do not want to fail as a business owner by overstocking or failing to fulfill your customer requirements. In this case, you need accurate details of your inventory. A Stock Keeping Unit number keeps you updated with the goods available for selling, when you should restock, and what you should reorder.

"Also make sure you are tracking the inventory turnover ratio to avoid over or under stocking."

Win-Win Sales Opportunity with Inventory Sharing

With unique SKUs, you can share your stock across the entirety of your online stores as well as physical stores. It implies that your inventory will be continuously updated. You can share your stocks across all your business channels. Be it from retail stores, commercial centers, shopping carts, to many others. Furthermore, you will no longer have to hold stock for particularly one customer. But it will be open for purchase in all your business channels.

Quick-Pick Orders- Quicker Deliveries

According to a study, more than 80% of customers expect their purchase delivered within six days of buying it. Not just that, according to 70% of customers, they would not tolerate receiving wrong products more than 2 to 3 times by the same retailer.

It seems like a critical problem you never want to encounter in your business life.

With the pandemic, online shopping also saw a rise. And the patience of your customers is at an all-time low. Considering that, it is of utmost importance to keep up with their expectations.

On a hand, you have your customers waiting to receive exactly what they ordered within 6 days of placing the order. On the other hand, you have your employees dealing with a warehouse full of products and their variants. In such times, SKU comes to your rescue.

SKU number saves your time. It lets you know the exact location of a particular product in the warehouse. So the product can be picked quickly and shipped for delivery. SKUs fasten the delivery process and ensure the right product is delivered.

You can further optimize your Pick-Pack-Ship process by using an online inventory software like Deskera.

Efficient Packing & Shipping of Goods

SKUs not only make it easier to pick orders quickly and accurately but also make packaging efficient. You no longer have to create a packaging slip manually. All you have to do is, scan the SKU barcode, get the product details in your system and print it. Your packaging slip is ready! More accurate and faster.

Moreover, if you are using a digital inventory system like Deskera, the SKU numbers updates automatically. It keeps you updated and allows you to monitor your inventory, the entire process from shipping to delivery both.

Efficient Cycle Counting

In every business, it is necessary to timely check how good is your inventory management system going. For this, you require the latest and accurate inventory details.

If you don’t have accurate inventory details, it will make for a poor inventory report. Hence, having well-integrated systems makes your work easy. All one must remember to do is scan the SKU. So, whenever there is cycle counting, you know three things.

Firstly, because SKU helps you to track your inventory, it will enable a smooth counting process. Secondly, you get a better understanding of customer demands.

Quick Response to Customer Demands & Questions

Imagine walking in a shoe store? You pick something you liked. Then, you ask the salesperson for a specific size in the same design. The salesperson takes a long time to go through multiple boxes in the display and the storage, only to return and tell you that the size is no longer available.

How does that make you feel?

Frustrating right?

With SKU, the salesperson can quickly check in his system whether or not he has the required variant of the product and update the customer. If the customer is ready to wait for some time to get the same design, the salesperson can promise to provide it in a day or two. In this way, you don’t lose your customer.

Let’s take a look at how it works so that you can start today.

How to Create SKU Numbers?

A Stock Keeping Unit is a combination of letters and numbers. The combination gives insights about the product- like the brand, model number, color of the product, size, quantity, so on and so forth.

There is no standard technique to create an SKU number. Every company can bring in its distinct style that is convenient to them to construct the SKU number.

Here a few best practices or say tips that may help you create your SKU number:

  • Each SKU number should be unique to its product because the same SKU should not be used again in the future for other products. For example, if the SKU number for a specific product is BLU-SML-G233-VER, no other item should have this SKU number.
  • Keep it short! Make sure you have a small SKU number. It will help in easy reading and understanding the features quickly.
  • Refrain from using spaces. If necessary, replace that space with a dash (-) separating different features of the product.
  • Avoid usage of special characters (for example, <, *, ), $, #, and other symbols) because it may confuse people.
  • Do not use letters that can be mistaken for a number (for example, 0 & o, I & 1)

Example of Constructing an SKU

Example of an SKU Number

SKU Number from example above: ABC-BG-BLU-SML-G233

ABC in the code denoting the brand of the product.

BG in the code is the short form for Bag that denotes the product type.

BLU in the code, which is a short form for the color Blue, signifies the color of the product.

SML in the code, which is a short form for small, stands for the size of the product.

G233 in the code is the product number.

You can create many such SKU codes for your products depending on the nature of your business/product.

SKU Number and Barcodes

Barcodes is a way to encode SKUs as needed. So you can take an SKU number string and convert it to a barcode easily using any free barcode generator tool available.

Barcodes though may contain more information than what the SKUs hold. For e.g. it may also contain the serial or batch number in addition to the SKU.

Final Thoughts

Now that you have gathered all about SKUs. From the meaning of SKU, the difference between SKU & UPC, the benefits of SKU, to how it works.

Today, the use of SKUs and UPCs is becoming more essential than ever. Considering the various benefits of using SKU in inventory management, you should not miss out on it.

Deskera makes it easy for you to manage inventory  and integrates SKU & UPC scanning. You save time by simultaneously updating inventory and accounting data for you in the system while creating transactions or carrying out pick-pack-ship for order fulfillment.

So, what is stopping you? Get your free trial with Deskera today!

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