Functions of a SKU number
What is a SKU? Understand article numbers and use them for e-commerce
Good product management starts with SKUs. But what are they? And how do you create them? This article will help you understand SKUs - from how they work, to the factors that make them so important to retail and wholesale success.
If you're like most online retailers and wholesalers, you've invested a ton of money in inventory, which is at the heart of your sales, purchasing, and inventory processes. Therefore, it is essential to the success of your business that you keep a careful eye on the inventory.
A SKU, which stands for Stock Keeping Unit, is a unique identifier for each of your products that makes it easy to carefully track all of your inventory. SKUs are important tools for retailers and wholesalers, enabling them to identify products across systems and channels. Your success depends on good product management. And good product management depends on SKUs.
What is a SKU?
Every product you sell needs a unique identifier called the Stock Keeping Unit (SKU), which helps you differentiate one product from another. Each variation of a product - color, size, etc. - should have its own SKU that tells your employees, customers, suppliers, and systems that it is the same item. You also know SKUs as product codes, part numbers, and manufacturer part numbers.
Why use SKUs?
When it comes to inventory management, there are few concepts more important than SKUs. They will help you with:
Rationalization of the ordering system. When placing orders with suppliers, the more likely you will get the correct products by using the SKUs on their price lists and order forms. Even when integrating your suppliers' systems, you need to use SKUs - common reference numbers that ensure that both systems are talking about the same products.
Simplify ecommerce and multichannel integrations. SKUs pay off especially when separate software systems are integrated. For example, if you
Integrating your e-commerce and ordering systems, you need a single identifier for each product - in each of its variants - to ensure that exactly the right product is delivered to the customer.
Keep all systems up to date. When you update the inventory of a product in your master product database, all systems must also be updated. To automate this, all systems must use the same identifier for each product.
Easier use of terminology Differences between systems. Often times, the same SKU has different details in each channel you sell on. The large red T-shirt in the example below (SKU “TEE-LRG-RED”) has different descriptions in each of the three systems - the consistent SKU is therefore essential for linking the product data.
How do I get SKUs?
It depends on who makes the product:
When another company is the manufacturer. Third-party products may contain barcodes with 8-, 12-, or 13-digit numbers underneath. These unique numbers, known as Global Trade Identification Numbers (GTINs), Unique Product Codes (UPCs) or European Article Numbers (EANs), are generated by central offices and purchased by manufacturers in order to affix them to their products. Since each product variant has its own UPC or EAN, these numbers can also be used as SKUs. Similarly, you can use a book's Standard International Book Number (ISBN), the 10- or 13-digit number printed with the barcode on the cover, as the SKU.
If you are the manufacturer. It is a good idea to buy UPCs for your products, print labels for them, and make sure you always refer to them.
What makes a good SKU?
If the products you buy from your suppliers don't have SKUs, or you make your own products, you can create your own SKUs. You can also create custom SKUs - even if your suppliers give you SKUs - to disguise your supply chain.
Guidelines for creating SKUs:
- Keep this short. A SKU should be a maximum of 32 characters long so that the same data fits into all systems.
- Make them unique. Do not reuse SKUs from previous seasons.
- Never start a SKU with a zero. When working with SKUs in Excel, the first character is omitted if it is a zero, which causes problems.
- Avoid ambiguous signs. Letters like I, L, and O are easily confused with numbers.
More best practices for SKUs
Always use a standard format. Regardless of how you create your SKUs, through a generator or a manual process, you should use a standard format. Once you have a standard format, always create SKUs in a similar shape. This makes it easy for your employees to know what each code stands for when assigning a SKU to the product for picking and shipping.
The best approach is to start with the most important product information first and end with the product variants. Options with multiple variants should come at the end, while those with only a few options (such as gender) should go at the beginning, but typically after the product category and type.
Here is a format you can use for your SKU system
Brand> Product Category> Product Type> Gender> Material> Size> Color
If you have a lot of detail to include in your SKU formats, try generating SKU codes that are no longer than three characters or use numbers instead of multiple characters.
Don't use the same letters or numbers. Because SKUs are typically read at a glance by your team, avoid using similar symbols that can be misread.
For example, it is possible to mix up the number “0” and the letter “O” or the number “1” and a capital “I”.
Avoid starting SKUs with the number 0
As mentioned earlier, to avoid confusion with the letter “O”, avoid using the number 0. However, if it's a requirement, don't put it at the beginning of your SKUs. This is because some software could interpret the number 0 as ‘nothing lassen and leave out the first digit.
Make sure your SKUs are unique and not duplicated. To ensure proper inventory control and provide customers with accurate information at all times, avoid duplicate SKUs within your own catalog. Even if a product has been removed from the catalog, try not to reuse old SKUs, as this can lead to identification problems or shipping errors.
Don't use spaces. While every code in your SKU should be separated for easy readability, you should never break your SKU with spaces for the following reasons: First, it may lead to SKU read errors as a person is not sure whether they are refer to multiple series of numbers to the same string or SKU. Second, some software can interpret the space as a hard stop and ignore the data that comes after the space.
To solve the space problem, put a hyphen between each code in your own SKU, especially if you are creating and entering SKUs manually.
Just keep it simple. Stick to numbers and capital letters with separators such as hyphens or periods. Also, avoid spaces and slashes, which some systems don't handle well.
Which is better - character or numeric SKUs?
When planning your SKUs, you need to decide whether you want to use long character codes or short numeric codes. Both have their advantages.
Character SKUs can be more descriptive so you can use them to filter reports and product lists by brand, season, style, and more. For example, this is what character SKUs look like for a basic T-shirt from a sample company, which is available in three sizes and two colors:
Note that with such character SKUs you can immediately see which product is which.
The disadvantage is that the character SKUs are long, which can make picking and packing difficult. If your picking team works with SKUs, simpler numeric SKUs may be better suited. Take the storage facility shown below. All SKUs are simple 5-digit numbers that are easier to pick and easier to read on the phone when accepting or placing an order.
You can also use a combination of letters and numbers in your SKUs. For example, for the echostar t-shirts, you could add a number to the end of the product code: 2013ECH-1, 2013ECH-2, and so on.
What about barcodes?
Barcodes are simply graphical representations of numbers or combinations of letters and numbers so that you can create barcodes for any of the identifiers discussed. However, the barcodes you see preprinted on products are almost always the ISBN, UPC, or EAN. Here is a 12-digit EAN (121016801952):
Barcodes are designed to speed up point of sale (POS) and warehouse operations and reduce errors, and if you only use them within your company, you can use any number for the barcode.
If you are providing products to merchants who can sell them to their customers using POS software, you will need to tag your products with your UPC or EAN codes, which they can use as well.
What is the difference between SKUs and UPC codes?
Have you ever wondered what those two seemingly identical series of numbers on the back of a product really mean? In most cases, these sequences of numbers are the SKU and UPC codes of a product. Although they look similar, they perform two different functions.
Here is the breakdown so you can remember:
If you're a new business and still need barcodes on your merchandise, check out the GS1 Starter Guide on Creating Barcodes and UPCs to Sell Your Products in Stores and Online.
You should always make sure that your SKUs and UPC codes are not the same. Here's a quick rule of thumb: Have your SKU identify the product features and the UPC code for the manufacturer (first six digits), the item (the next five characters) and the check digit (last digit). The check digit is formed by adding and / or multiplying several digits in the code to show that the UPC code is valid.
Now that you know what SKUs are, why to use them, where to get them, and how to make sure they are effective, it is time to follow the key points of this post and implement them in your business. When you do that, you take your product management process to a whole new level. From then on, growing across multiple channels is much easier.
SKUs are not a one-size-fits-all retailer, and the more you customize your architecture to meet your specific needs, the more successful your business will be.
But remember: There is also no standard for building SKUs that works for every online retailer. The more you, as a retailer, adapt architecture to your specific needs, the more successful your company will be.
Do you know what is important for you, your suppliers and your customers? Then you can start building a SKU architecture that will allow you to effectively manage your company's inventory while understanding how to grow and adapt to ever-changing needs.
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