The buying behavior of customers is something which cannot be predicted. You never know when a customer puts your product in the shopping cart and successfully completes the checkout process. Hence it is necessary to have a sound inventory in order to deliver the products on time to your customers.
If you are a small startup and have very few clients, then managing the inventory won’t be much of a problem. But if you are a medium sized company and have a pretty good list of customers, then maintaining an inventory becomes tough. It becomes extremely imperative to know the status of each and every product in the inventory so that you are prepared to deliver the best even at the rush hour. This makes it mandatory for mid-sized companies to maintain SKU (Stock Keeping Unit) which helps to know the exact status of the inventory. So let’s first understand what is SKU:
Stock Keeping Unit or SKU is a unique alphanumeric code assigned by the e-tailer which consists of the specifics of each product in the warehouse, including the product attributes such as color, size, price etc., and also helps to track the product inventory. This helps the e-tailers to recognize and organize the product more easily in the inventory. Once you have understood SKU, next you need to know how to generate it.
In order to generate SKU, you must break down the product you sell into different categories, for example, if you sell Laptops then you can create SKU by further dividing category into
Brand Name > Product Name > Version > Configuration > Color.
Some of the characteristics to adopt while designing SKU are:
1. Ensure that you always start the SKU with an alphabet has a maximum length of 12 characters.
2. SKU should be easily understandable by all of your employees.
3. SKU must not be the same as UPC and should not contain special characters.
4. Should consists of only the information which is required.
5. Alphabets should be bold and clear so that it reduces confusion.
NOTE: UPC — Universal Product Code is a 12 digit code used to identify products. This is used worldwide wide, whereas SKU is specific only for your company. Hence, make sure you don’t frame SKU similar to that of UPC.
Let’s try to understand the Stock Keeping Unit with an example:
DEL-LAP-LATITUDE E5410–20GB-BCK
In the above example: DEL-Brand Name, LAP-Product Name, LATITUDE E5410-Version, 20GB-Configuration, BCK-Color.
Once we know how to frame SKU for the products, next we must understand how this can help e-sellers to grow their business.
1. Increases efficiency:
With SKU’s, it becomes easy for the e-tailers to track the availability of the product in the inventory. If any product is fast moving, the seller can check the available stock of the product in the inventory and can order the manufacturer depending on the requirement. Thus, SKU eliminates the time spent to physically verify the product in the inventory. Additionally, this also increases efficiency as you will be able to deliver the products to the customer without any inconvenience.
2. Quality Control:
SKU enables automation of a major aspect of inventory management, thus resulting in reduced errors due to lesser human intervention. Since the entire information of the product in the inventory is available, it reduces the stock outs due to wrong manual update. This, in turn, helps to provide a high-quality product to your customer.
3. Identify Slow Moving Products:
Slow-moving products are a big hindrance to the growth of any business. Since you will be paying a certain amount on every product placed in the warehouse, it is necessary to take extra effort to clear these products as soon as possible. SKU helps you to have a clear idea of the slow-moving products and thus you can implement new strategies to move it out of the shelf.
4. Generate High Profit:
SKU not only helps you to analyze the fast moving products but also helps to understand the product variations (i.e, color, size, price etc..) better. This gives you in-depth details of the product variants that are doing well and also on the non-performing variants. This helps you to understand which are the product variants to stock in order to gain a good profit.
In order to maintain good sales, having a healthy inventory is very important. By SKU you can have clear thoughts on what’s good and bad for your business. Hence, if you are an SME and want to have good control over the inventory, then SKU can support you to manage it.
