Once you begin receiving a high volume of orders, chances are you’ll have a lot more stock than you can manage manually.
Products start flying off the shelf fast. You’ll have to order and ship more. Your hands become full. And, things become very complicated very quickly.
But that’s where SKUs come in.
SKUs are a type of product identifier that make it easy and convenient to track products everywhere in your supply chain.
In this post, we’ll cover what they are. Why they are important. How to create them. Examples of SKUs. And tips for creating SKUs that work.
Let’s begin!
What is SKU?
SKUS (short for Stock-Keeping Units), are a string of letters and numbers you can use to track the different products in your inventory.
Imagine you sell snowboarding clothing for men.
SKUs help you differentiate your various products by sizes, model, product specs, quantities, brands, manufacturers and practically any attribute that will aid inventory management.
There’s no standard format for SKUs, so even two companies selling the exact same products, will most likely have different internal SKU codes.
Since there’s no standard SKU format, a best practice is to make SKUs as easy to interpret as possible.
This is so company members and warehouse workers who interact with inventory don’t find your SKU system confusing.
SKU Vs UPC: What’s the difference
Don’t confuse SKUs with UPCs, which is another type of product identifier.
A UPC or Universal Product Code is a standardized 12-digit number used to identify products.
UPCs are issued by the Global Standard Organization to the manufacturer of that product.
All wholesalers and retailers buying that item must follow its UPC accreditation.
To differentiate between them, remember;
SKUs are internal codes a company chooses for itself.
Whereas, UPCs are a globally standard code that remains the same no matter who sells the product.
With that said, let’s cover some of the benefits SKU categorization offers ecommerce sellers.
Why do you need SKU for your e-commerce store?
Product identification and efficient inventory management
SKUs take away the hard work in product tracking.
Since they record meaningful details like product type, color, size, and more, the process of locating goods in your inventory will be simpler.
And, with SKUs, even if you have thousands of products in stock, you can search at any time how many have been sold, how many are available, and how many are out of stock.
So you’re also at reduced risk of suffering a stockout or overstocking.
Minimized errors and theft
SKUs are also important for confirming the accuracy of inventory counts and viewing reports by various company departments.
In other words, using them makes it easy to detect stock shrinkage due to incorrect ordering, incorrect picking and packing, and employee theft.
Streamlined order fulfillment:
Without SKUs, you can’t automatically know which item to ship according to an order.
But with an SKU system, you can find and refer to exactly which item fits the specification (think blue, size 17, etc.) of what should be shipped.
Consequently, the process of fulfilling orders becomes accurate, streamlined and efficient.
Another way to streamline order fulfillment is with the support of fulfillment services.
Third parties like Globallyfulfill help handle order processing, inventory management, and shipping so you can focus on growing your business.
Inventory forecasting
SKUs provide an additional layer of warehouse visibility, which is super helpful for forecasting.
In turn, this informed forecasting lets you communicate with suppliers to ensure they can meet minimum requirements.
Remember that SKUs also reveal how fast products sell. You can use that data to let your suppliers know about restocking demands and shipping timeframes.
Speaking of suppliers, are you looking for reliable dropshipping suppliers?
If you’re not careful, you might hire a supplier that never has enough stock, fulfills and sends out wrong packages and ships products late.
But this is not what you want.
Rather, you want customers to associate your company with positive experiences, making it vital to discover the best dropshipping suppliers in 2023.
Now that we know what SKUs are and why you need them, let’s explore how to create SKUs for your products in 5 simple steps.
How to create SKUs for your products in 5 steps?
1. Start with a top-level identifier
The beginning or first 2-3 letters of an SKU should represent a top-level identifier.
In other words, start with the most general classification that the product belongs to.
This can be the supplier, the product category, a department, or a warehouse location.
If you sell clothing you may also begin with the season and year of that product or collection. such as in “FL2023” for a Fall 2023 collection.
Or for product categories, a 2-3 abbreviation of the name of that item, i.e., SHT for shirt and JKT for jacket.
Arranging the details from most important to least important is best so your fulfillment team can tell where the product is just by looking at the first few characters of the SKU code.
2. Assign the unique identifiers in the middle (size, material, color, etc.)
The middle section is best for including details such as size, material, and color.
As well as common variations in apparel products like stripes, sleeve length, color, fabrics/materials and adornments.
Generally speaking, consider what key details will make organizing your inventory easy, and sort them by what makes the most sense to you.
For example, if you sell a single model extra-large blue t-shirt from your FL2023 collection, you might create your SKU to read FL2023-TSH-BLU-XL-101.
But if you have several sleeve variations of that shirt, you can modify it to read;
– FL2023-TSH-BLU-XL-LS for the long-sleeve version
– FL2023-TSH-BLU-XL-SS for the short sleeve version.
– And FL2023-TSH-BLU-XL-NS for the sleeveless version.
3. Complete the SKU with a sequential number
Now, complete the SKU code with a sequential number so;
– You can differentiate individual items within the same category.
– Tell old stock from new arrivals.
– And count stock effortlessly regardless of the number of products you want to organize.
Continuing with our example;
FW2023-TSH-BLU-XL-LS-001 would indicate the first shirt in the long sleeve line.
FW2023-TSH-BLU-XL-NS-010 for the tenth t-shirt in the sleeveless line.
4. Sync your data to an inventory management system
After finalizing your SKU numbering system, the next step is to add those product identifiers to your inventory management system.
When you’re handling hundreds of products, it’s not efficient to manage SKUs manually.
Recording in notebooks or going back and forth over a spreadsheet is open to human error, so beware of the risk of inaccurate inventory tracking.
On the other hand, syncing your SKUs to a reliable warehouse management system enables your entire operation team with convenient real-time access to stock information.
As a result, identifying, restocking, and fulfilling orders becomes seamless, thus keeping your business running effectively.
5. Generate SKU barcodes
After adding SKU codes to your stock management system, it’s best to create a barcode for each product.
A barcode is a scannable product identifier your packaging team should attach to the product’s label before shipping out.
That way, whenever a product is scanned for checkout, your inventory system will be updated about the sold item, thus making it easier to track inventory.
SKU number Examples
SKU numbers are not standardized. That said, know that your situation should be the biggest influence in whatever attributes you decide to include or exclude.
In this section, we’ll go over three different SKU formats for three companies with different requirements.
Example 1; Men’s sportswear dropshipper
Product; Men’s Tennis Shoes
SKU; M-T-BL-10-UA-112
Each attribute represents;
- M- Gender category – male
- T – Product type – Tennis Shoes,
- BL – Color – Blue
- 10 – Size – Size 10 –
- UA- Brand – Under Armour
If you’re a multi-brand retailer, your SKU will need to include the brand name.
But if you sell products exclusively under your brand, you obviously don’t need to include the brand within your SKU.
Instead, refer to this example that begins with the product category.
Example 2; Women’s office attire retailer
Product; Women’s office blouse
SKU: BS-WH-S-SS-121
- TS – Product type – Buttoned shirt
- WH – Color – White
- S – Size – small
- SS – Product specs- Short sleeves
- 121 – Product number
This company solely sells women’s clothing. Hence, it can exclude a gender category.
Example 3; Casual fast fashion store
Company; Men’s beach shorts
SKU; SM23-M-SHO-MO3-YL-003
This store sells casual fashion for men, women and kids. Here’s how they classify their men’s beach shorts.
- WT23 – Product season – Winter 2023
- M – Gender category – Male
- SHO – Product type – Shorts
- MO3 – Model – Model 3.
- YL- color – yellow
- 003 – the sequential number.
Clothing sellers often deal with dozens of variations of the same product. Hence, adding a model number is sometimes necessary.
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Tips for creating SKU numbers
1. Keep them simple
While you can be as detailed as you want, it’s best to include only the most critical attributes.
So, don’t complicate your SKUs with tons of additional details that make it hard to work with.
2. Arrange SKUs by order of significance
Always begin with the most general trait and work your way down to the most specific.
Generally most clothing sellers can start with details like gender, season and product category. While details like brand and size can come towards the end.
3. Separate details with a hyphen “-”
To avoid confusion, each attribute should be set off from the others with a hyphen.
4. Never start an SKU with the number 0
Most computers and software programs interpret a zero at the beginning of a character string as nothing. Therefore, it will read “0232” as “232.”
So, if you want to prevent this error, never start your SKU with a zero.
5. Avoid letters that are easy to confuse with numbers
If it’s possible, avoid using letters that can easily be confused for numbers.
For example, the letter “I” can be easily mistaken for the number 1. And the letter “o” can be easily mistaken for the number 0.
Most of the issues with numbers that look similar to letters can be solved by strictly using uppercase. Avoid lowercase letters and don’t mix uppercase with lowercase.
6. Don’t copy your manufacturer’s or supplier’s SKU
It may be tempting to take the “zero-commitment route” of copying your supplier’s SKU.
But you don’t need to be a genius to figure that this approach will become very overwhelming when you work with multiple suppliers.
The same way you are meant to tailor SKUs to your business is the same way your all your suppliers tailor their SKU systems to their business.
If you copy your suppliers’ SKUs, be prepared for confusions and erroneous inventory decisions down the road.
7. Use 1-3 characters for each attribute
Ideally, SKUs should convey product information at the first glance.
To achieve this, use between 1-3 characters to define each separate item attribute.
Different details will call for different character counts, just like you can;
– Use the single character “M” for male,
– Create a two character acronym for longer details like TS for Tennis Shoes,
– And make something that’s naturally comprehensible like BLU for blue or BLK for black.
8. Use serif fonts
Serif or monospace fonts have a tiny stroke at the end of each character that helps to distinguish between different letters. Try them out for more simplicity.
9. Don’t include spaces
Due to programming language intricacies, a lot of software tools can’t read spaces. So, use hyphens (-) or underscores (_) to indicate a break in space instead.
10. Maintain consistency
Maintaining consistency simply means sticking to the same format so there’s no mix-up between products later on.
11. Create an SKU guide for your fulfillment team
The last thing you want is your meticulously planned SKU system to look like a bunch of random letters to your fulfillment staff.
So consider making an SKU guide for warehouse workers and other members of your company to understand how it works.
Final Thoughts
SKU systems are a great method of managing inventory systematically.
By assigning each product a number that corresponds with its attributes, you automatically become able to make informed inventory choices and smarter replenishing decisions.
Remember, there’s no standard format for SKUs, meaning you must tailor your system to your very own requirements.
If you’d like to see more practical guides and tips like this, head over to the Globallyfulfill blog.
Every week, they post new tricks and strategies for navigating the ecommerce industry and finding success as an online seller!
