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What Is SKU? – Definition, Benefits, And More

Definition SKU

Maybe you do know what exactly SKU stands for: Stock Keeping Unit —or expressed in Spanish: inventory maintenance unit. But it must be recognized that, in this specific case, knowing what the acronyms refer to does not clarify too much the mess. So let’s get into explaining the concept more clearly.

What is an SKU? It is, basically, the code that identifies a specific product that is for sale (what is usually known as “the smallest sales unit”). A code consists of a set of unique and unique characters with the product it represents.

Let’s clarify this definition with a small example. A shoe company, for example, will identify a particular model pair of shoes in a specific size with a unique SKU. And, despite referring to two shoes, this is its ‘smallest sales unit.’ Come on. The SKU will refer to the pair and not to each shoe separately.

With that said, let’s move on. The SKU code is alphanumeric, which means that it usually made up of letters and numbers. In this way, each company decides how to compose it. Some opt for an automatic generator of codes that are randomly associated with the products in the. Although the most common is that some system is followed through which the Stock Keeping Unit itself offers relevant information about the product in question.

Let’s go back to the previous example. Let’s say that the shoes we are referring to a model called Ibiza, which brown and size 41. The SKU, in this case, could be generated automatically, although it makes more sense to follow a system in which the final code is something like ZAP-IBI-MAR-41. Or some equally recognizable variation.

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And what is it for?

When generating the SKU code, this systematology also makes it even easier for each product to have a different number based on minor variations. For example, of the identical shoe, we could also have ZAP-IBI-MAR-38, ZAP-IBI-MAR-39, ZAP-IBI-MAR-40 … and so on until all the possible numbering of the sizing completed. Well, we organized.

In this way, the warehouse’s inventory will be identified in a precise and detailed manner, which will allow better traceability of each of the products. We will know where each unit is at all times (and where it has been) no matter how different teams share the same SKU. The idea is that all the branches of the same product are together in the same place and that this place is easily traceable thanks to the Stock Keeping Unit.

In some way or extra, you have to think of the SKU code as a kind of ID for each product (and not for each unit). The exciting thing here is that each company can establish the system that best suits them and adapt to their most pressing needs.

And it that the combination of letters and numbers can (and should) be established based on the needs that each seller specifies based on the needs of their buyers and the objectives of their own company. A furniture company, for example, may find it necessary to enter the measurements in the SKU, while a shoe producer like the one we have seen will end up prioritizing the sizing of their shoes.

Of course, it advisable that the resulting alphanumeric code as refined as possible and not unnecessarily lengthened. Because, If not, we can end up with totally ungovernable SKU codes. That would make it difficult for us to manage inventory instead of helping us to optimize our warehouse.

What are its benefits?

The main benefits of using the SKU code come from the definition. And use that we have already determined in the previous paragraphs. But, be careful, because if these acronyms have become a philosopher’s stone in many stores. It is precisely because their advantages are multiple and varied.

Let’s see them then in the form of a list so that each of the benefits as clear as possible.

  • First, the most obvious: A sound SKU system will allow you to know at all times. If you have availability of a specific product within your warehouse. And without having to go to the shelves to make sure of it.
  • This speed in dealing with the product in stock translates directly into a better end-user experience. Or what is the same: a much more competent customer service.
  • Traceability is one of the great obsessions in managing all inventory. Using this SKU code, keeping track of products, and bringing everything together in reports (even in real-time) couldn’t be easier.
  • Utilizing SKUs also improves a company’s predictive strategies. More detailed reports and impeccable traceability will allow us to know. Which products have more output, when they sell more, And also, when a new sales peak expected, for example.
  • The probability of error reduced with these SKU codes. If you are looking for a shoe in size 41, it will be much more. Difficult for you to mistake it for the same model in size 40.
  • When it comes to e-commerce, using SKUs will make it easier to show buying suggestions to consumers. This code, after all, allows products to grouped according to standard features. Are you looking at these brown shoes, but they haven’t quite convinced you? Don’t worry. Here we show you other brown shoes that we also have in stock. As simple as that.

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