SKUs: An Underrated Tool in Logistics

SKU (pronounced: SKEW) stands for “stock keeping unit”. As the name suggests, it is a set of digits business’ use to keep track of and identify stock internally. SKUs are used for a multitude of reasons, some of which we’ll discuss later, but common reasons to incorporate SKUs are to keep track of stock levels and help employees find and identify stock within a warehouse.  

What is a SKU?

SKUs are typically made up of eight alphanumeric digits and are assigned by product type and category. For example, American Eagle may assign a SKU “AE-W7-LE-SA" for a pair of shoes. This SKU could indicate the specific shoes as follows:  

• AE: American Eagle
• W7: Women’s size seven
• LE: Leather
• SA: Sandals  

What is a SKU vs a UPC?

SKUs, UPCs, and barcodes are all unique identifiers that help entities within the supply chain name stock. A SKU is created for individual business use and is used for internal identification. A Universal Product Code or UPC is the 12-digit identifier for a product across all retailers. UPCs are sold and maintained by GS1, a nonprofit organization. So, most often a UPC is purchased and assigned before the retailer or business receives the product.  

A barcode is a visual representation of data in a machine-readable form. A UPC will always be accompanied by a barcode and businesses can create barcodes for their SKUs, if they’re needed.  

How do SKUs help a business?

Recent headlines like “Major department stores are slashing prices to get rid of excess inventory” and "Target takes 87% hit to operating profit as it resets inventory” highlight the need for tight and responsive inventory management. Incorporating and utilizing SKUs into your warehouse operation can help overcome and avoid these pitfalls.  

SKUs take the guesswork out of your inventory management efforts by creating a systematic means of tracking individual pieces of inventory. Tracking and organizing inventory levels becomes easier, especially when combined with other WMS features like virtual warehousing and turn-by-turn warehouse directions.  

Having and utilizing SKUs and an inventory management tool also helps logisticians track high and low profitability of inventory. Tracking profitability becomes easier when businesses incorporate SKUs into their data analysis. Having SKU data helps a business keep track of cyclical sales trends, regional consumer differences, and identification of obsolete items. This simplifies planning and procurement decisions and helps businesses be more responsive to consumer preferences and avoid the recent inventory woes seen by major retailers.  

How to manage SKUs

If you’re going to incorporate SKUs into your business, it is incredibly important to have a system to keep, maintain, and track your SKUs. A great place to start is to use or create an existing product catalogue to identify major products groups and create a plan for assigning SKUs to products. It’s important to remember to make your SKUs easy to understand and use.  

In addition to creating usable SKUs, incorporating SKUs into your existing ERP, WMS, or Point of Sale software will help enhance the visibility and keep your data current.

The takeaway

SKUs are a simple and powerful tool supply chain professionals can incorporate into their business. SKUs can be implemented by themselves or as an addition to existing software, like a WMS. Regardless of how they’re incorporated, SKUs help businesses better track their inventory and track profitability of stock.  

Using SKUs with ShipCaddie, a TWMS, will allow for the full use of features like virtual warehousing, pick and pack management, and turn-by-turn warehouse directions. If you would like to learn more about ShipCaddie, request a demo or reach out to us via LinkedIn today!