What is the full form of SKU?

What is SKU?

The full form of SKU is Stocked Keeping Unit. It is a bar code which can be seen in the printed form on different products in different retail stores. SKUs are beneficial as they let the store owners know about the movement of inventory. SKU is a combination of 8 alphanumeric characters which are used to track the following −

Price
Product details
Manufacturer
Point of sale (POS)

SKUs can also be used for warranties and for billing tasks such as repairing a machine. When you purchase something from a store, the POS system removes the product from inventory when the SKU is scanned. This helps to bring more stock of that product.

Importance of SKUs

SKUs help stores to know which products are popular among customers so that their stock can be maintained and managed. This method may lead to the purchase of more products and this will lead to earning more revenue

Types of SKU

Where SKUs are used?

There are many places where SKUs can be used and they are listed below −

Catalogs
Etailers
Product fulfillment centers
Retail stores
Warehouses

How to get an SKU code for a product?

Producers use the SKU numbers so that they have knowledge about the products which have to be restocked in the inventory. This is the reason no universal standardization has been provided to the SKUs. This will help you to make any kind of SKU system which will be needed for your products. You will need SKUs to track the sales of products easily and also maintain inventory. Here are the steps to make an SKU

SKU has to be unique and cannot be same for different products.
SKUs should be short as long SKUs can be complicated to read and understand. Long SKUs may also create problems in maintaining inventory.
Spaces and special characters should not be used while creating an SKU as this can lead to confusion for the buyers when they purchase a product.
Such letters should not be used that can be confused with numbers like O for 0, I for 1, S for 5, etc.
A dash can be used for the separation of different attributes.

SKU Management

SKU management can be used to analyze the cost of the products so that inventory can be easily maintained and there is no financial glitch. Management of SKUs leads to the optimization of inventory. Poor SKU management can lead to investing high costs in the inventory. SKU Management can be divided into two types −

Manual SKU Management

SKU ratio and sales ratio are needed to manage SKU manually. Let us know about both of these ratios and their calculations.

SKU Ratio Calculation

A list of catalogs along with SKUs should be noted in a spreadsheet
The price of each SKU should also be noted along with the cost borne by you and the gross profit
Gross profit is calculated by subtracting the cost and the price.
A range of gross profit should be created and SKUs that fall in each range should be noted
The number of SKUs in a range should be divided by the total number of SKUs and multiply the answer by 100
This will provide the SKU ratio in each range

Sales Ratio Calculation

With the help of gross profit ranges, make a list of the number of products sold in each range.
Divide the number of units sold in a particular range by the total number of units sold
The answer should be multiplied by 100 which will provide the sales ratio

Results examination

Now make a list SKU ratio and sales ratio for each gross profit range and compare them
The products that perform will have a sales ratio higher than the SKU ratio
This comparison will let you know about the products which are high in demand

Automated SKU Management

Automated SKU management improves the data accuracy in comparison to the manual one. Here are the steps to use automated SKU management

POS system should be integrated with inventory management, bar coding, and other tools
A software application should be used to manage the inventory
This will help in knowing about the availability of items in the stock and inventory will be updated automatically
Analytics will help to enhance the methods of purchasing processes so that revenue can be increased

Difference between UPC and SKU

SKUs for some products are different in other stores. This helps a store to hide the discounted price from other retailers. Comparatively, UPC is same for the identical products available in different stores. Other differences can be found in the table below −

SKU	UPC
SKUs are used internally	UPCs are used externally
A business creates unique SKUs	GSI prefixes are used to create UPCs
SKUs are alphanumeric	UPCs are only numeric
The length of a SKU can be 8 to 12 charactera12	UPCs are always of digits
SKUs can be easily read by humans	A bar code reader is used to read UPCs

Advantages of SKU

SKU has many advantages and some of them are listed below −

SKUs are used to separate each type of product
A product can be easily searched
Inventory management is easy
Customers' behavior can be easily recognized
Production planning and sales forecasting can be easily done

Conclusion

SKU stands for Stocked Keeping Unit. SKUs are used internally by each business to separate different types of products like shampoos, soaps, utensils, etc. SKUs are used to maintain and manage inventories. It also lets the business know which products are in demand and which of them are not performing well.