Understanding SKUs. This ebook explains why and how to manage your product SKUs successfully.

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1 7-87 Understanding SKUs This ebook explains why and how to manage your product SKUs successfully.

2 to Understanding SKUs A successful retailer or wholesaler needs to have reliable and efficient systems to run their business These systems need accurate, consistent data in order to operate - especially so when separate software systems are integrated with each other. Product data sits at the centre of sales, purchasing and inventory processes, where it s particularly important to have well structured information. Good product management starts with the SKU. This ebook explains why and how to manag your product SKUs successfully.

3 Every item you sell needs to have something that uniquely identifies it from other products. Let s take a Echostar Tee Shirt for example. The product name is tee shirt, and it comes in different sizes; Small, Medium and Large. Depending on the software you use, that s either one product with variations, or three separate products. In the real world, where you manage inventory, you have separate items. The fact that they are all called Echostar Tee Shirt is helpful for group them together, but not very useful when it comes to finding out what you have in stock. This is where the SKU - the Stock Keeping Unit - comes in. Each variation of an item should have its own SKU, which lets your systems, your staff, your customers and your suppliers know that they are talking about the same thing. Alternative names for SKU include product code, part number or MPN (Manufacturers Part Number). As long as it s unique, down to the variant level, then you re OK. Style codes Many businesses have a product code that is the same across all variants. If you re selling clothing, then this may be called the style code. This is not the SKU. It s not unique since all variants have the same code, and is therefore useless for inventory management. Whenever you talk to suppliers or customers about the product, you re also going to have to describe the size or color - which can be ambiguous and can lead to mistakes. By all means have a product code for a group of products, but make sure you also have a unique SKU. SKUs for customers When customers are buying from you in a bb scenario, they often like to quote part numbers or SKUs - this speeds up the buying process as well as helps reduce mistakes. If your suppliers don t give you SKUs, then make up your own. You might want to make up your own customer-facing SKU even if your suppliers do give you SKUs, in order to help disguise your supply chain. SKUs for suppliers When you place purchase orders with suppliers, you re more likely to get the product you want if you use their SKU. You ll often find this on their price lists or order forms. If you re integrating with your supplier systems, then you ll need a common reference so that both systems are talking about the same product - this is the SKU (which may be the same as the UPC - see below).

4 Where unique SKUs really come into their own is when you start integrating different software systems together. So, for example, when you sell the small tee shirt on your website, your order processing system needs to know that it s the small one that the customer wants when the order is downloaded. If both systems know that the SKU is TEE-S then there s no ambiguity. Similarly, when you update the inventory level of a product in your hub system (your product master database), all other systems will need to be updated. If this is to be automated, all systems need to have the same reference for the product. Having a SKU also lets you handle differences in terminology between systems. ebay for example will have color : blacks where your ecommerce store or Point of Sale system will have color : black. Of course most merchants product ranges will contain far more complex structures than just size and color; the SKU helps remove this layer of complexity by linking the product data purely via a set of unique codes. Here we can see the same product (a large, red tee shirt) available on sales channels, each of which refer to it in a slightly different way. We know it s the same item because it s got the same SKU; TEE-LRG-RED.

5 If you are manufacturing your own products, or the products you buy from your suppliers don t have a SKU, then you ll need to come up with your own. A SKU needs to be short, so that all systems can fit the same data. characters or less is sensible. It needs to be unique - you ve hopefully picked that up by now! Don t re-use SKUs from previous seasons. Never start a SKU with a zero. When you work with it in Excel, you ll lose the zero if it s just numbers - not good. It s also a good idea to avoid ambiguous characters such as I, L, O - where it s hard to tell whether it s a number or a letter. Stay to just numbers and capital letters, with a separator such as a dash or dot. Don t use slashes, since some systems don t handle these well. Stick with simple characters if you have to use anything other than numbers and letters, and don t use spaces. Numeric or character SKUs? When you plan your SKUs, you need to decide whether just to have a short meaningless code such as 787, or a longer code that gives an indication as to what the product actually is. If you can make the SKU meaningful, then you can use it to filter reports and product lists into brands, seasons, styles and so on. Let s take the example of the Echostar Tee Shirt, which is made by Nike. It comes in sizes and colors. NK-TEE-ECHO-SM-RED NK-TEE-ECHO-ME-RED NK-TEE-ECHO-LG-RED NK-TEE-ECHO-SM-GRN NK-TEE-ECHO-ME-GRN NK-TEE-ECHO-LG-GRN Without having to explain what we ve done there, you can immediately see which item is which. If Nike gave you a style code of 0ECH, then you could use that as part of the SKU instead of NK-TEE. Of course you don t need to put all that extra information into the SKU. It can make it too long, which makes picking and packing harder. If your picking team are working from SKUs, then simpler is better. Take the warehouse setup below, where all the SKUs are simply a digit number. These are easier to pick, as well as easier to read out on the phone when taking or placing an order.

6 Without having to explain what we ve done there, you can immediately see which item is which. If Nike gave you a style code of 0ECH, then you could use that as part of the SKU instead of NK-TEE. Of course you don t need to put all that extra information into the SKU. It can make it too long, which makes picking and packing harder. If your picking team are working from SKUs, then simpler is better. Take the warehouse setup below, where all the SKUs are simply a digit number. These are easier to pick, as well as easier to read out on the phone when taking or placing an order. A compromise solution would be to append a number to the end of the product code, which for the tee shirts above would be 0ECH-, 0ECH- etc. At the end of the day, it s up to you which SKU method you use. Just make sure it s the SAME SKU across all your business systems. It s worth putting the time in to get this right.

7 GTIN,, ISBN If you re selling another manufacturer s products, you may find that they have a barcode already with an 8, or digit number underneath. This is the GTIN (Global Trade Identification Number), which can also be referred to as Unique Product Codes (UPC) and, in Europe, European Article Numbers (EAN). These are unique numbers, generated by central agencies and purchased in bulk by manufacturers to put on their products. Because every size and variation has its own UPC or EAN, it can also be used as the Stock Keeping Unit if you want. Similarly, books will have an ISBN, which is a 0 or digit number, printed with the barcode on the cover. If you manufacture your own products, it s a good idea to buy your own codes, print labels for them and make sure that you always refer to this code when working with your (business) customers. Buying UPC / EAN codes We suggest spending some time on the gsuk.org (UK) and gsus.org (USA) websites, where you ll find plenty of information about product codes, as well as fee information for membership and the numbers themselves. Barcodes A barcode is simply a graphical representation of a number or combination of letters and numbers, so you could in theory create a barcode for any of the identifiers we ve talked about above. The barcodes you see pre-printed on products, however, are almost always the ISBN, UPC or EAN. Here s a digit EAN (0809): Barcodes are designed to make Point of Sale and warehouse operations faster and more reliable, and if you re only using the barcodes internally within your business, you can use any number to generate the barcode. 7

8 The Principles of Commerce tion The Commerce tion Journey : Where Are You? Inventory Management Done Properly Multichannel Order and Inventory Management Organizing Your Products Inventory Reporting and Optimization Find it all at

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