Inventory Management

3 SKU best practices to get your inventory sorted

BY Vera Lim 17 Sep, "15

As you begin selling your products through wholesale or retail channels, you’ll need to devise an alphanumeric Stock Keeping Unit (SKU) system. SKUs are product codes that you (and others) can use to search and identify stock on hand from lists, invoices, or order forms.

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SKUs are a key part of good inventory management, as you’ll be able to effortlessly track your inventory right down to individual variants of every product (i.e. color, size etc). SKUs are also unique and specific to particular locations; for example if you have two warehouses, each stocking identical products, they’d have different SKUs to allow for efficient inventory management.

However, do remember that each SKU is associated only with stock on hand that is readily available for consumption, and does not include ordered stock that is in transit to replenish the SKU in your warehouse.

As SKUs defines the product, right down to the most minute details, they represent the most fine-grained level and are central to optimizing your inventory as you’ll be able to apply this information to your chosen inventory management technique.

Selling on Consignment

Deciding on and setting up an efficient SKU system will help improve the responsiveness and effectiveness of fulfilling orders or answering queries. Here are three SKU formatting best practices for you to consider:

  1. Make them easily understandable

    Always pay attention to color, size, type, and season variants -- these need to be incorporated into the SKU to aid in identification. Do not load the numbers used with meaning (eg. 1 is red, 11 is pink, 12 is magenta) because this can quickly turn into a confusing string of numbers. If you go down this path, you will have to keep a legend on hand to decode the meaning, and that is not an efficient use of your time.

    Ultimately, your SKU is a way to record important product information, so the more straightforward it is, the better it is for everyone.

    Eg. Summer 2015, Flower Tee, Small, Red = S15T-Flo-RS

  2. Arrange words according to importance

    Think of how you would describe a product (e.g Summer 2015, Flower Tee, Small, Red) -- what are its most important attributes? For example, you may have different Flower Tees for different seasons every year, so identifying the year and season will help you narrow down the search to the specific collection immediately, followed by less distinctive attributes like color and size.
  3. Don’t use letters that look like numbers, spaces, accents or symbols.

    This is pretty straightforward, but it’s always a good reminder. Always stay away from O because it can be easily mistaken for a 0. Also, using “/” can result in Excel formatting your SKU as a date instead, while other symbols like “>”, “<”, “*”, and accents (e.g. āăűȔ) can also have other unintended consequences. Sticking to alphanumeric SKUs and substituting “-” or “_” for a space is always the safest and best bet.

If you're planning to set up these best practices within your current system, we're here to help! We've created an SKU generator that'll generate an SKU according to your product details, to ensure that you'll have easy to understand product codes for your inventory.

Setting up a solid SKU foundation...

will help you to track your inventory , as you’ll always know where everything is, and how much stock you have left.

Consignment and warehousing

Firstly, this minimizes opportunity for theft, as in a warehouse filled with thousands of products, missing items may be overlooked. However, when the products are narrowed down to individual SKUs where each denotes a far smaller number of products… it makes it significantly harder for things to go missing.

In addition, with SKUs, you’ll also be able to set individual reorder points for every product and their variants so you’ll always know when replenishment is necessary. That way you’ll never go out of stock or end up bearing unnecessary carrying costs for excess stock.

Moreover, you’ll be able to determine the popularity -- not just of products, but also of individual variants, and which ones of these to invest in, and which to consider discontinuing.

Having a good SKU system is central to inventory optimization, which will allow you to reduce the carrying costs associated with overstocking slow-moving products, while maintaining or improving customer satisfaction.

So what are you waiting for? Give our SKU generator a try and let us know what you think!

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See More:

SKUs and UPCs: do your products have a unique identity?
Tips from our eBook — Inventory Management : Getting Started
Using Cloud Computing to break inventory management bad habits

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