It’s not the most exciting of blog topics but nonetheless, the subject of SKUs is an all-time favourite for fulfilment professionals. But what is a SKU? How do you even pronounce it? And why does outsourcing your fulfilment involve so many questions surrounding them?
What is a SKU [skyoo]?
A SKU, or Stock Keeping Unit (not to be confused with a UPC – more commonly known as a barcode) is a unique alpha-numeric number used to identify a product. Every single variation of a product would be considered as an individual SKU.
Time for a test…
Q. You have 1 t-shirt design, available in 5 colourways and 5 sizes in each of those. How many SKUs do you have? See the bottom of this article for the answer!
Who uses SKUs?
- E-commerce retailers
- Bricks and Mortar retailers
- E-commerce fulfilment centres
- Wholesalers
- Warehouses
How do you determine a SKU?
There are no set rules for generating SKUs, they are unique to your business and should be tailored to your business’ specific needs. However, you may want to consider the following:
- Begin with a letter and aim to generate between 8 and 10 digits
- Ensure each number/letter has a meaning
- Provide key characteristics of a product – for example, brand, colour, type and size
- Arrange the information systematically from the most important to the least
- Allow room for your code to extend
- Opt for an easy to understand format
What might a SKU look like?
A pair of brown classic Rocket Fulfilment boots in a UK size 5 would be 1 SKU and could be generated to look like this: ROC-CLA-BRO-UK5.
A Rocket Fulfilment keyring in one size might be ROC-KEY-ONE.
If your business also wholesales the keyrings, you may also wish to consider an alternative SKU to identify carton sizes. For example, a case of 20 Rocket Fulfilment keyrings in one size might look like R0C-KEY-ONE-C20.
Why use SKUs?
Finally the long-awaited explanation as to why fulfilment companies go on and on and on about SKUs. SKUs are super beneficial for numerous reasons – they make life easier…
- SKUs make it easier for you, your customers and others to find, search and reference products
- SKUs make it easier to track inventory including identifying stock on hand and shrinkage
- SKUs make stocktakes easier ensuring accuracy and efficiency
- SKUs make replenishing inventory easier… you can implement threshold limits for each individual variation, only reordering items at the precise moment at which they are required, therefore reducing inventory holding costs
- SKUs enable you to minimise out of stock statuses on your website
- The implementation of SKUs can assist in identifying profit by enabling you to report on bestsellers down to the colour and size, underperforming products and variations, which in turn will impact on strategic business decisions and SKU ratios
To conclude…
In summary, SKUs have a huge impact on inventory management for e-commerce business’. Effective inventory management ultimately provides retailers with the opportunity to not only save money but to generate extra sales.
In terms of outsourcing your order fulfilment, SKUs (as well as barcoding) have a huge impact on accuracy at the picking and packing stage. Warehouse staff will navigate their way around the warehouse, using a trolley to collect all products on their pick list. Once this task has been completed, the picker will return to the packing area to deliver the goods ready for the next stage of order fulfilment to be completed. The packer will be responsible for identifying the items relating to each sales order. If in this instance, there are a number of similar goods on the trolley, the SKU will help them to ensure that the right items are being sent to the right customers. Accuracy equals happy customers which in turn achieves additional sales.
Who would have thought that 8-10 digits could be so great?!
A. 25 SKUs
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