This is a post by Cara Wood.
Have you ever looked at a price tag and wondered why on earth there are so many numbers and letters on it? What are they all for? One of those numbers sets is usually the SKU number (stock keeping unit). SKU numbers are unique to each store and allow the store to keep track of each item in inventory. SKU numbers can be anything you want to be but are most often about 8 alpha-numeric digits.
SKU vs UPC vs Serial numbers
There are quite a few numbers associated with products and inventory-keeping and it can be hard to tell what makes them all different. We know what a SKU number is, but what are the others and how are they different?
First, there’s the UPC number (universal product code). The UPC number is the twelve-digit number that runs along the bottom of the barcode and, as the name implies, is a universal number. That means anyone with a barcode scanner can read the number. It also means that the UPC is not unique to a store. If two companies are selling the same item, those items will have different SKUs, but the same UPC.
Next, there’s the serial number. Serial numbers are unique to each specific product and are most frequently used for electronics. (If you’ve ever had an issue with your laptop, you’ve probably encountered the serial number as you’ve given details to a help desk or customer service, for instance. It’s that number on the barcode tag on the bottom of your laptop.) Serial numbers are used to track the ownership information of an item. They can also be used to track warranty information.
What do SKU numbers mean to SMBs?
SKU numbers are important for every store to use because they make life way easier. Each SKU is recorded within your internal tracking system (which is hopefully an inventory management system and not a manual spreadsheet). Once within your system, SKUs will make it possible for you to record loss easily, make smarter inventory decisions, track the exact location of each item, increase the accuracy of your inventory and warehouse activities, and for your employees to easily look up inventory to help your customers. When done right, a SKU number can even tell an employee what item should be attached to your SKU.
True story: When I was working retail, a woman once came in with a list of SKUs from the catalogue that she wanted to buy, but no other descriptors. Coincidentally, our inventory management system also chose that particular hour to go out. I was actually able to locate all 5 pieces she wanted to buy because our SKU numbers were well set up to direct me to the right items.
SKUs also enable some really amazing marketing activities. For instance, SKUs are what are used to generate suggestions for other items you might like on a site. They are also used to run product remarketing on a site like Facebook.
At the end of the day, SKUs take your physical items and turn them into pieces of data a computer can easily track. You really can’t eschew SKUs.
How Do You Generate SKU Numbers?
You can generate SKU numbers any way you want, but it’s probably easiest to use your inventory/retail management system. The length is up to you, but do take into consideration that your staff will need to be able to easily read and even remember SKUs. (Grocery cashiers, for instance, often end up memorizing swaths of produce SKUs in order to be able to ring faster.) You can also choose to use only numbers or letters – or do a combination of the two.
When choosing digits, you could go totally random. However, it’s better to imbue your digits with some meaning. By that I mean, segment the digits out to refer to certain things. For instance, if you have an 8 digit SKU, the first two digits could refer to the item category, the second two digits could refer to sub-category, the third two could refer to item color, and the last two can be the unique identifier.
There are a number of ways this can be done. First, if your inventory is simple enough, you may only need to specify a single category and combine it with a sequential set of numbers to refer to the item. Here’s a visual example of how that would be put together for a small pet store:
|Dog Toys||10||Tennis Ball||012||10012|
|Rodent Accessories||20||Hamster Wheel||005||20005|
|Cat Food||30||Salmon Bites||001||30001|
The item codes should be created in a sequential order (thus, each new item you get in will just be assigned the next available number). The item codes can be reused in different departments, as well. So “012” could be used for Chicken Bites in the cat food department, even though it’s used for Tennis Ball in the Dog Toys department. (That Chicken Bites SKU, by the way, would be: ‘30012.’)
However, your inventory may get more complex. Here’s a quick list of the aspects of an item you might wish to put into a SKU:
- Store Location
- Item Type
Let’s look at how a clothing store with men’s, women’s and children’s clothing might want to create a SKU.
Each section of the SKU tells a detail of the item and these codes can be put together in unique ways to demonstrate particular items. A different men’s purple sweater than the one seen in the table above, for instance, might be M223-02-002. You could also see that the first 5 digits of any women’s purple sweater would be W223-02, or that a pair of men’s green jeans would start with M606-51.
When a SKU number is put together this logically, it becomes easy to see how a sales associate might be able to take a number and figure out what item it represents.
SKU Number Tips
You can reuse SKUs.
Some people will tell you not to reuse SKUs ever — but the truth is, as long as you wait for a few years or so (after multiple total catalogue refreshes and completely selling all items attached to that SKU) you can certainly reuse your old SKU numbers.
The store I worked for in college did this with no hiccups. In fact, the only reason I ever realized that they reused SKUs after a number of years is because one customer decided to return an item she bought 12 years previous and had never worn. The item still had the tags and the old SKU number, which corresponded with a new item when I typed it into our system.
The first 2-3 digits should represent the highest category.
Use the first few digits of the SKU number to represent what is the highest category of importance about the item to you, and work into the more unique features of the item. (And once you’ve locked your formula in, always write your SKUs in the same order.)
Think of it as the opposite of how you identify where you’re from. That is, when identifying your hometown, you start most specific and get more broad. I’m from Trumbull, Connecticut, in the United States, which is on the North American continent on planet Earth. A good SKU number goes the opposite direction, essentially identifying planet first and town last.
Avoid beginning the SKU with the number 0.
You shouldn’t start your SKUs with 0s, mainly because some data storing software may interpret that 0 as literally nothing. That is, when told to store the number “012345,” the software will read it as “12345.” It’s just best to avoid putting yourself in that situation altogether. (This tip is a solid data storage tip in general. Try to avoid starting data with 0’s.)
Do begin your SKU with letters.
Starting your SKUs with letters is an easy way to help them stand out in a spreadsheet filled with other numbers. It provides an easy visual cue that that’s the beginning of a SKU number, rather than a continuation of the number in the cell before it.
Avoid using letters that look like numbers.
It’s a good best practice to avoid using letters that can be confused with numbers or even other letters (‘I’ can look like ‘1’ and a lowercase ‘L’, for instance).
Your staff will (fairly often) have to type SKUs in by hand and you really want to make this process as quick and easy for them as you can.
If you don’t want to completely cut these numbers and letters out of your system, you should ensure that you use sectioned SKU numbers in which some sections are only ever [uppercase] letters and some sections are only ever numbers. IE, a SKU that looks like this: BLE-134. Your staff will know that ‘O’ is the letter and not a zero if they see it in the alphabetical section in that case.
Don’t use any of the manufacturer numbers within your SKUs.
In general, it’s recommended that stores avoid reusing the manufacturer numbers as or within their SKU numbers in order to prevent confusion. SKUs are meant to be unique to each business, so go ahead and honor that. Of course, the easiest way to avoid using any of the manufacturing numbers is to have a set formula (as mentioned in the previous section) for generating SKUs in place, rather than to approach SKU creation haphazardly.
Don’t overload your SKUs with meaning.
Finally, while you do want to infuse your SKUs with meaning, you don’t want to overload them. For instance — you don’t want to end up creating a 32 digit SKU because you wanted to get every last piece of detail you could into the number. It’s better to forsake some detail in the name of ease of memorability and fitting the number on your tags.
So pick which 2-3 aspects of items matter most for you when dividing up your warehouse or store floors and then let the item’s specific identifying number at the end of the SKU do the rest of the lifting.
And if you really need to fit more than 3 aspects of detail in, keep the individual codes as short as possible. For instance, if you work with nine manufacturers, assign them a single digit 1-9, rather than abbreviating their name into a 2-3 letter code.
Need help staying on top of SKUs and stock in general? Learn how to manage your merchandise with ease by reading Vend’s Complete Guide to Retail Inventory Management. This handy resource offers advice and action steps to help you:
- Set up your products and inventory system correctly
- Get the right people and processes in place so you can stay on top of stock
- Figure out which of issues are causing shrink in your business so you can prevent them
SKU numbers are a surprisingly powerful tool that all retailers have at their disposal. By turning your products into numbers, you can track your inventory and make smarter merchandising decisions. You can also make life easier for your floor staff. SKUs really are a win-win.