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Jul 21, 2023 4:44:43 PM | Sell Your Products What Is SKU? The Key to Efficient Inventory Management

I know some thoughts are popping into your head. "What is SKU?", "What should I do with it?". However, we're here to guide you to inventory efficiency!

Our blog cover, with the title "What is SKU?" on the left, with Shoplazza's logo and a picture with multiple boxes, meaning SKUs

Maintaining a well-organized inventory is crucial to success if you're a retailer. To achieve this, retailers utilize Stock Keeping Units (SKUs) as a key to help them track inventory and make all the products available to customers. If you’re wondering, “What is SKU?” this article is the perfect guide for you!

As a retailer, it is OK to have some thoughts about how to track inventory levels. That’s why we will help you improve how you organize your stock.

Also known as SKU numbers, they’re a way to organize your e-business stock levels since an SKU number is a universal product code to manage and track inventory efficiently.

Here, we will explore the significance of SKUs in inventory management, how universal product codes (UPC codes) benefit retail businesses and their role in generating smarter inventory purchasing decisions.

If you’re a new business owner or need to improve your ecommerce store, this is the opportunity to master your inventory skills to reach customer loyalty!

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What is a stock-keeping unit?

An SKU, or Stock Keeping Unit, is a unique alphanumeric code assigned to each product in many retailers' inventories. Usually known as UPC code, this SKU code also acts as a digital fingerprint, representing the specific product's characteristics and essential details. SKU format facilitates efficient inventory management, allowing retailers to track products even when exporting, monitor stock levels, and generate data for informed decision-making.


The importance of SKUs in inventory management

We already talked about SKUs’ significant contribution to retail businesses. However, we’ll list some points proving how an SKU number is necessary for operating your online store smoothly.

1. Track inventory

SKUs are the backbone of inventory management systems, enabling retailers to accurately monitor product movement, sales, and stock-keeping units. The use of SKUs streamlines the tracking process, preventing confusion and errors.

Explaining the flux, you need to generate different SKUs for each item when you receive items in your inventory. By generating SKUs, you’ll have on your POS system the mapping of this product on your inventory and the entire route this product takes to complete the order fulfillment process by checking a unique number.


2. Smarter inventory decisions

By collecting SKU data, retailers can analyze sales performance and identify their top-selling products. For example, if you sell enamel pins online, you can track your business on your system by checking each pin’s performance with a few SKU numbers.


3. Customer satisfaction and loyalty

Proper SKU management ensures that retailers can meet customer demands promptly. When customers find their desired products in-store or online, it enhances customer satisfaction and fosters customer loyalty.

For example, while selling crafts online, customers can track their entire purchase journey by checking a unique SKU code, showing them all the logistics steps involved in the purchase, and creating a great customer experience.


4. Inventory optimization

SKUs help identify slow-moving or lowest-selling products, enabling you to adjust your inventory levels and stop selling some products, focusing on more profitable merchandise. This means you don't have to contact your suppliers to buy products that are sitting in stock.

When you generate SKU numbers, you have the opportunity to know what items you have available to sell and a broader view that can make you build brand-new marketing strategies to increase sales and ecommerce rates.

The SKU system and implementation

The SKU system generates unique SKUs for each product, typically in the format of an alphanumeric code. For example, an SKU may include the manufacturer's code, product category, and specific model, followed by a check digit for accuracy. Special characters are usually avoided to maintain consistency and ease of use.

That means you can track where they are, the retail store location, the category of a product, the specific product, and other information by only checking an SKU number. You can know where a product is in your stock, even if they are the same type of similar items.

SKU numbers allow you to collect data about important characteristics typically required for external use, making its implementation help management retain data from customers and SKUs for decision-making.

As a manufacturer, that means your company's survival in this brutal market landscape. We know you don’t want your brand to fail, right?


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Managing stock-keeping units

In a retail business, SKUs are vital in managing inventory effectively. Retailers use SKUs to track product availability, set reorder points, and generate purchase orders when stock levels reach predetermined thresholds. POS systems often integrate SKU tracking, making the process seamless for retailers and enhancing inventory control.

Through your POS system, your team in charge of inventory management can identify the right products available to sell as soon as someone places an order in your store.


In conclusion, what is SKU?

Our blog cover, with a robot and a human organizing an inventory, representing what is SKU and how it is a tool to help online merchants.

SKUs, the unique alphanumeric codes representing individual products, are essential for inventory management if you’re a retailer. The systematic use of SKU management enables efficient tracking, smarter inventory purchasing decisions, and optimal stock management. 

By implementing SKUs into their inventory systems, retailers can improve customer satisfaction, boost sales, and enhance their overall business performance. 


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João Gabriel Freitas

Written By: João Gabriel Freitas

João Gabriel Freitas is a Content Marketing Specialist at Shoplazza. He's addicted to discovering new restaurants and loves to walk around the city. When he's at home, he's probably listening to music or trying to learn a new language.