SKU (stock keeping unit) management is the process of organizing and tracking the unique identifying codes that are assigned to each product in a company’s inventory. These codes, also known as product identifiers, are used to track and manage the sales, orders, and inventory of a company’s products.
Effective SKU management is essential for any business that sells physical products, as it helps to ensure that the right products are available to customers when they want them and helps to prevent stock-outs or overstocks. It also helps to streamline the ordering and restocking process, as well as to track the performance of individual products.
There are several key elements to successful SKU management:
- Each product in a company’s inventory should have a unique SKU that distinguishes it from other products. These SKUs can be based on numerous factors, such as the product’s size, color, style, brand, manufacturer, and lot number. For example, you have a Women’s (W), Shirt (S), Blue (B), Size (6), Item Number (317); therefore, the SKU would be WSB6317.
- It is important to keep accurate records of the quantity of each product in stock, as well as the location of each product within the warehouse/store or geographically for multiple locations. This can be done using a computerized inventory management system or manually using paper records. Keep in mind that any manual tracking method becomes extremely complex and time-consuming as you add new products.
- Monitoring sales and restocking are critical to a business’s health. As products are sold, the inventory levels of those products should be adjusted accordingly. It is also important to monitor sales trends and restock products as needed to ensure that there is a sufficient quantity of each product on hand to meet customer demand.
- It is important to set up alerts or notifications when inventory levels of certain products reach a predetermined low level. This can help to ensure that products are restocked before they run out, avoiding stock-outs, and lost sales.
- Analyzing and tracking the performance of individual products will be a key function in the financial health of a business. By tracking the sales and inventory levels of individual products, it is possible to identify which products are performing well and which may be struggling. This information can be used to make informed decisions about which products to continue carrying and which products may need to be discontinued or replaced. This is probably the most overlooked step in SKU management, as many businesses end up with too many products in inventory that are not financially performing.
- If your product is sold through multiple channels, an assigned stock-keeping unit identifier may not be enough, as other merchants may have assigned the same identifier. A SKU will be sufficient for internal operations; however, a business that wants to sell its products in an external retail marketplace will need to consider purchasing a UPC (Universal Product Code).
Overall, effective SKU management is critical for ensuring that a company has the right products available to meet customer demand and for maximizing the efficiency and profitability of its inventory. By properly organizing and tracking product identifiers, businesses can streamline their operations and make informed decisions about their product mix.