What is SKU in shipping? Meaning and role in warehousing

SKU or Stock Keeping Unit is a term widely used in inventory and warehouse management. SKU is a unique code assigned to products to easily identify them in the warehouse. It helps companies track the products to account for every piece in the inventory. SKU is placed on the product in the form of a scannable bar code, most often seen printed on product labels in a retail store. Scanning the label helps vendors automatically track the movement of inventory.

What is an SKU code?

SKU code is a reference number generated by a company to track the product. It is an alpha numeric code, a combination of letters and numbers that identify characteristics of each product, such as manufacturer, brand, style, colour, and size.

Companies generate their own unique SKU codes for goods and services they sell. For example, if an e-Commerce brand is selling two 3D printers from two different brands both will have a separate SKU.

Some examples of SKUs

SKU is a combination of letters and digits consisting of 8 or more characters. These are generated by the company according to the specifications of each product. For instance, Company A sells 10m copper wires from brand XYZ. The SKU for this product could look like this: XYZ-CUW-10.

This is just an example of an SKU number. Companies usually have their own ways of assigning SKU product numbers. Some companies identify the category the product is under and start the SKU codes with the code of the category. Others simply choose the descriptors like size, colour, etc., to generate an SKU.

The table below is an example if the SKU codes started with category codes:

Category	Code	Brand	Item	Code	SKU
Laptop accessories	A3	RE	Power bank	04	A3-RE-04
Mobile accessories	B3	HY	Power bank	04	B3-HY-04
Mobile accessories	B3	PD	Earphones	02	B3-PD-02

 

The table below shows SKU codes of products classified according to their specific features:

Product	Code`	Item colour	Code	Item size	Code	SKU
AB Bicycle	X1	Blue	BLU	Medium	M	AB-X1-BLU-M
AB Bicycle	X1	Red	RED	X-Small	XS	AB-X1-RED-XS
P3 cycle helmet	T10	Green	GRN	Large	L	P3-T10-GRN-L
SW cycle helmet	T10	Black	BLK	X-Large	XL	SW-T10-BLK-XL

What is SKU used for?

SKUs are used by vendors for different purposes. Given below are the main purposes of SKU codes:

• Analysing inventory

Companies with a large inventory in their warehouses need to identify and track the product seamlessly. If a product has an SKU with a defined category and specifications, it is easy to pinpoint its location in the warehouse. Combining this with automation software makes inventory management effortless.

• Tracking and forecasting sales

SKUs indicate the brand name, product category, subcategory, size, colour, or style. This means you can track products that have high demand. Therefore, you can keep track of the products customers buy the most and the ones that are less popular. This will help you replenish the stock with the most in-demand products, leading to improved sales and profits.

• Improving vendor communications

You can easily track the products that are best sellers based on SKU trends. You can thus make sure that enough quantities of products with demand are shipped to avoid late shipping and dissatisfied customers. You can even forecast a sales figure for these items and set a minimum demand target and communicate it to the vendors to improve sales.

• Easy identification of products

Going back to the copper wire example, if Company A in the future wants to sell 20m, 30m, etc., wires then the company can easily add these variations to its SKU codes (for example, XYZ-CUW-20 and XYZ-CUW-30) which will help determine the length of the copper wire.

How to find SKU?

It is easy to find the SKU for a product on your packaged product as well as your online order.

• If you are trying to find the SKU of a packaged product, then you need to first locate the barcode. Once you locate the barcode look for the alpha numeric code on the top of the barcode. This is the SKU of your product.
• If you are looking for SKU for an online product, you should go to the product listing page. Each product would have an SKU number in the description.

But do remember that SKU might not be used by all the companies, therefore, you might not be able to find one. Also, some companies use internal SKUs and do not display it on the label of the package with the barcode or on their website.

SKUs are making shopping experience more efficient in modern times. In the past, if you went to a shoe store and asked for a specific model, the salesperson had to search through endless boxes to find you the right model. However, now many stores arrange shoes according to their SKUs making it easier to find the right model and be accurate about the colour and size as well. Large retailers now have portable scanners that enable salespeople to check the inventory by simply scanning a floor sample. SKUs have enhanced online shopping logistics as well.