If you are just starting to build up your eCommerce business, you may have started thinking about the size of your inventory but not necessarily, how you are going to manage it. While product SKUs are traditionally associated with large warehouses of physical goods that are shipped, they are also used in all areas of eCommerce as well. As your business grows and you scale it upwards, your product volume is going to grow and without a proper SKU management system in place, it can become a mess really quickly. To help you with this, we have the best practices to use to tackle SKUs as an eCommerce business in 2021.

A SKU is an alphanumeric code that is unique to a specific product in your inventory. It is used to monitor and purchase quantities of that product and measure the amount of sales for that product. You will recognize a SKU by its unique combination of numbers and letters, which are unique codes that identify the product. It may include what the product’s coloring is, what brand it is, or even what type of item it is. For instance, clothing SKUs are creating with several combinations: brand, item, color, sex, and size.

There are several reasons as to why you should be managing your SKUs and they go hand-in-hand with similar reasons for physical stores.

• Inventory Tracking

  When every product in your inventory has a SKU attached to it, you can accurately track the state of your inventory, what your stock levels are like, and any relevant information regarding that product. It makes it incredibly easy to know when it is time to restock, ensuring that you don’t run out of items causing customer frustration. You also avoid overstocking the item and holding up your capital in unsold products.

• Streamline the Selling Process

  When SKUs are managed properly and tagged to the right item, you can streamline your sales. The product will appear in your order management system and its location will be easily retrievable, allowing you to ship out and sell the product faster. It also allows you to quickly inform customers if a product is sold out.

• Gain Buyer Behavior Insights

  You can use the SKUs to gain insight into buyer purchasing behavior by looking at how many sales each SKU gets. This enables you to create a visual representation of how your inventory flows and see which products or their variants are trending upward. You can also combine this monitoring market trends to know which products to purchase.

• Accurate Warehouse Information

  Warehouse inventory management and space is expensive. By managing your products with SKUs, you can increase how productive your warehouse is and optimize how space is being used. A SKU system can also reduce the number of human errors when picking out the right products for shipping. Finally, a SKU system that is managed properly can give you automated reports on your warehouse so that you can see inaccuracies in warehouse operations that are causing bottlenecks in the system. You also decrease the likelihood of items being stolen or lost with proper SKUs registered in the system.

• More Control Over Logistics

  When using third-party logistic companies to ship and deliver your products, a proper SKU management system will allow you to identify where your products are with real-time tracking. As you gain more information on where your products are headed, you can identify which warehouses certain products should go to, so that these products are closer to the customers who purchase them.

If you are picking up inventory from another person or company, it is ill-advised to try to learn their SKU system. Instead, develop your own system that works with the product attributes in a way that your team can understand and utilize. Here is how to do this.

• Identify Product Attributes

  When creating a SKU system for your products, identify the product attributes that are important to your business. Perhaps it is easier for you to place the model number or brand name of a product at the beginning, or color and size at the end.

• Create a SKU Template

  Create one single template or framework for naming, managing, and assigning SKU codes to your products. This ensures that all of your SKUs are cohesive and are easy to understand.

  • Use significant attributes like manufacturer, size, type, and color.
  • SKUs should only be between 8-12 characters and start with a letter.
  • Avoid using zeros and only use uppercase lettering.
  • Avoid using symbols.

• Make Sure the SKU System Scales

  Make sure that the architecture of your SKUs are appropriate if and when your inventory grows. Consider how you are going to work new products, brands, and variations into the SKU system.

• Test & Refine

  Everything looks great on paper, so make sure to test the efficiency and accuracy of your SKU system. If there are problems, refine it or change it completely and retest again.

By taking the time to create an easy to understand and scalable SKU management system, you will eradicate errors around product misplacement and tracking, and boost the efficiency of your warehouse operations while gaining insight into your customer base.