Understanding SKU Numbers + Their Role in Warehousing and Fulfillment

May 7

What is a SKU number?

A Stock Keeping Unit (SKU) is a unique alphanumeric code assigned to each product in a retailer's inventory. SKUs help businesses track products, manage inventory levels, and optimize fulfillment processes. Unlike Universal Product Codes (UPCs), which are standardized across all retailers, SKUs are unique to each business and can be customized based on specific product attributes.

Why are SKUs important?

SKUs play a crucial role in inventory and fulfillment operations by providing:

Accurate Inventory Tracking: Helps businesses maintain real-time visibility into stock levels.
Efficient Warehouse Management: Enables quick identification and retrieval of products.
Optimized Order Fulfillment: Streamlines picking, packing, and shipping processes.
Data-Driven Decision Making: Provides insights into sales trends and stock movement.
Prevention of Stockouts and Overstocks: Ensures proper replenishment planning.

How to create an SKU number

1. Choose a Logical Format

Your SKU structure should be systematic and easy to understand. A good SKU format typically includes:

Product Category: Apparel (APP), Electronics (ELEC), Books (BK)
Brand or Manufacturer: Nike (NK), Apple (APL), Sony (SNY)
Specific Product Details: Color (BLK for black, WHT for white), Size (S, M, L, XL), Material (COT for cotton, POLY for polyester)
Unique Identifier: A sequential or random number

Example: APP-NK-TS-BLK-M-001 (Nike Black T-Shirt, Medium)

2. Avoid Ambiguous Characters

Use uppercase letters and avoid characters that can be mistaken for others, such as O (letter) and 0 (zero) or I (uppercase i) and 1 (one).

3. Keep It Short but Descriptive

A concise SKU should be easy to read and input into systems while still containing all relevant product details.

4. Ensure SKU Consistency

Maintain a standardized format across all products to ensure seamless warehouse and fulfillment operations.

5. Use an Automated SKU Generator

Many inventory management systems provide automated SKU generation tools that help maintain consistency and scalability as your product catalog grows.

How SKUs are used in warehousing and fulfillment

1. Inventory Management

SKUs help track stock levels in real-time, preventing overstocking or stockouts.
Warehouses use SKUs to organize products efficiently and streamline restocking.

2. Picking and Packing

Warehouse workers use SKUs to locate items quickly for order fulfillment.
Automated picking systems rely on SKU numbers for efficient selection.

3. Shipping and Logistics

SKUs ensure that the right product is shipped to the right customer.
They assist in matching products to packing slips, reducing shipping errors.

4. Returns Management

SKUs help verify returned products and restock them accurately.
They assist in tracking defect rates and identifying product quality issues.

Best practices for managing SKUs

Use SKU Management Software: Many inventory management systems (IMS) allow businesses to automate SKU tracking and updates.
Regularly Audit Your SKUs: Conduct periodic SKU audits to remove obsolete or redundant products.
Integrate SKUs with E-Commerce Platforms: Sync your SKU system with Shopify, Amazon, or WooCommerce for seamless order processing.
Train Your Staff: Ensure warehouse and fulfillment teams understand SKU structures and usage.

Conclusion

A well-structured SKU system is essential for efficient inventory management, order fulfillment, and overall business success. By implementing a logical and consistent SKU format, e-commerce and retail businesses can enhance their operational efficiency, reduce errors, and optimize their supply chain processes. Whether managing a small online store or a large warehouse, leveraging SKU numbers effectively can lead to better tracking, improved accuracy, and increased profitability.

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