In the world of retail you will have heard the acronym SKU – but what actually is a SKU? And what are they used for? Let us break it down for you…
What does SKU stand for?
"SKU" stands for Stock Keeping Unit. A SKU consists of around ten (though the actual length can vary depending on product configuration) numerical or alphanumerical characters which are specific to both that retailer and that product. The SKU can be used to determine a product’s size, weight, colour and more easily identifiable aspects making it a great way to differentiate similar products in the same range or category.
A great way of identifying your products, SKUs differ from other types of codes due to their unique nature. Each SKU is created uniquely for that business and can be customised to meet the needs of the individual vendor making inventory management and tracking just that little bit easier.
What is a SKU used for?
Creating a successful eCommerce fulfilment strategy doesn’t just mean creating a process which effectively gets your products from point A to point B. An effective strategy encompasses each aspect of the fulfilment process meaning from inventory management through to returns & replenishment.
SKUs are used by both the purchasing and logistics departments. Being aware of your SKUs what they mean, how many there are, and where they’re located gives direct knowledge to the eCommerce brand about their products, inventory, and stock levels. Having this in-depth knowledge prevents brands from selling products which aren’t in in stock and gives purchasing teams ample time to replenish stock.
Not only that, SKUs are used as a way of identifying products, meaning that pick and pack teams are able to select the correct product for the order they’re fulfilling giving less room for error when it comes to the eCom fulfilment process.
How do I create a SKU?
When creating a SKU you should always ensure that you’re using a structured format and that each SKU (though individual to its own product) follows the same structure so that they can be easily categorised and found in a fulfilment setting.
So let’s build a SKU! For arguments sake we’re going to imagine that SCEND are a clothing brand which sells t-shirts, caps and jeans. Let’s get into it!
- The best way to start when creating a SKU is using some form of link to your brand name, this will ensure that all SKUs start the same way, and when it comes to a 3PL they can identify instantly which products are yours. So we’re going to use SCE as our starting point for our SKU.
- Next, we need to give a specific number to each of our products so that they can be identified easily. In this example we’ll build a SKU for “our” jeans giving them the number 01.
- With this being an imaginary clothing brand we’re going to look at some of the identifying factors, using jeans as an example we’ll look at colour, size and length. Looking at just one configuration of a pair of dark blue jeans in a size extra small in a short length our SKU could look something like this: SCE01 DBXS-S
Though this is a good start when building a SKU it’s not an exact science, and SKUs should be built in a way that suits your brand and your 3PL!
Making sure that you understand how SKUs work and why they’re important is one of the key elements to achieving a strong fulfilment process. If you’re looking to outsource your fulfilment to a 3PL who works with you as a true 3PL partner, speak to the team here at SCEND. Hit the “Let’s Talk” button below.
