Stock keeping unit (SKU)

Definition

A stock keeping unit (SKU) is a unique identifier assigned to a specific product or item in inventory management, enabling efficient tracking and management of stock levels. This alphanumeric code helps businesses identify and differentiate products, facilitating accurate ordering, inventory control, and sales analysis. By linking SKUs to product attributes such as size, color, and style, companies can streamline operations and enhance customer satisfaction.

5 Must Know Facts For Your Next Test

1. SKUs are crucial for tracking inventory levels in real-time, allowing businesses to make informed decisions about restocking and reducing excess inventory.
2. Each SKU is unique to a specific item and its attributes; for example, a red t-shirt in medium size will have a different SKU than the same shirt in large size.
3. Businesses can use SKUs to analyze sales trends over time, which helps identify best-selling products and informs future purchasing decisions.
4. Efficient use of SKUs can minimize human error during order fulfillment and inventory counts, contributing to overall operational efficiency.
5. In e-commerce, SKUs help streamline the online shopping experience by making it easier for customers to find and compare products.

Review Questions

• How do stock keeping units (SKUs) enhance the efficiency of inventory management systems?
  • Stock keeping units (SKUs) enhance the efficiency of inventory management systems by providing unique identifiers for each product, allowing for precise tracking of stock levels. This system helps businesses quickly determine what items are in stock, which need to be reordered, and aids in organizing products logically within warehouses. By using SKUs, companies can streamline processes such as restocking and order fulfillment, ultimately reducing errors and improving customer satisfaction.
• Evaluate the impact of using SKUs on sales analysis and forecasting within a retail environment.
  • Using SKUs significantly impacts sales analysis and forecasting by enabling detailed tracking of each product's performance. Retailers can analyze sales data linked to specific SKUs to identify trends, such as seasonal fluctuations or popular items. This information allows businesses to make informed decisions regarding stock levels, promotions, and new product introductions, leading to better alignment with consumer demand and increased profitability.
• Assess how the implementation of an effective SKU system could transform operations for a multi-channel retail business.
  • Implementing an effective SKU system could transform operations for a multi-channel retail business by ensuring consistent inventory visibility across all sales channels. With accurate SKU tracking, the business can synchronize stock levels between physical stores and online platforms, reducing the risk of overselling or stockouts. Furthermore, it enhances customer experience by allowing seamless order processing and fulfillment while providing valuable insights into consumer behavior across different channels. Ultimately, this strategic approach boosts operational efficiency and drives growth in sales.

Related terms

Inventory Management: The process of overseeing and controlling the ordering, storage, and use of products to ensure the right amount of inventory is available at the right time.

Barcode: A machine-readable code that represents data about a product, often used in conjunction with SKUs for quick scanning during sales or inventory audits.

Product Attributes: Specific characteristics of a product, such as size, color, brand, or material, which help in differentiating items within an SKU system.