A SKU (Stock Keeping Unit) is a alphanumeric code, usually 6 to 8 characters long, that identifies a product and makes it possible to monitor inventory. You can create SKU numbers manually or on your inventory management or purpose of sale (POS) software. SKU numbers print on your product label together with the product’s UPC Code and other product information.
Within this guide we will provide information on the significance of SKUs, as well as the way to create and manage your personal using Lightspeed POS. Lightspeed is our recommended POS for merchants with large inventories, partially because of its own SKU capacities and built-in inventory management system. Click here to start a free trial and then follow along below.
Visit Lightspeed
Why SKU Amounts are Important for Store Owners
SKUs help you track products in a stock management system, but that is not all. A nicely thought out SKU system helps you better plan and manage primary Regions of your company:
Shop Appearance & Shopping Expertise
SKU numbers help you map and arrange your shop so shoppers and staff alike can easily find products that are essential. A SKU number system lets you categorize products quite a few ways. You can monitor merchandise by item type, department, set, or seller, so that you may organize and easily locate products in your sales floor and in storage locations. This can help you enhance merchandising and provide an inviting, organized encounter to shoppers that leads to greater sales.
Without SKU numbers, you can eliminate track of where goods are in your area and wind up with confused employees, frustrated shoppers and worst of lost earnings.
Improved Client Checkout & Service
A streamlined SKU system makes client service and checkout tasks smooth and error-free. Tracking products using SKU numbers in a point-of-sale system, like Lightspeed POS, ensures that your inventory and pricing is always spot-on. When customers check outside, purchases ring up with the right pricing and your quantity-on-hand is automatically reduced for sold items. You may turn your SKU amounts into scannable barcode labels for quicker checkout.
Plus, as soon as a customer can’t locate an item, a fast SKU number lookup in your POS reports stock status and assists staff immediately locate it on the sales floor and close the sale.
Inventory Management & Profits
Inventory management errors are the third significant source of profit losses in the majority of retail businesses, just behind shoplifting and employee theft. These losses are due to numerous administration and data entry errors that, over time, can add up and seriously affect your bottom line. Tracking inventory with a SKU number system prevents many of these lost gain situations.
For example, if you do not organize your storeroom stock utilizing SKU numbers, it’s easy to lose track of overstock. If you can’t find your overstock to refill shelves, then you will reorder more stock than you really need. Or, if you do not correctly check-in inventory shipments, you won’t capture provider mistakes, such as shorted shipments. While this occurs, you pay for inventory that you didn’t receive and end up with stock shortages down the line. Both scenarios equivalent cash lost.
Utilizing SKU numbers together with a POS like Lightspeed reduces your stock management mistakes and costly losses. Most service barcode tags and scanners, too, for quicker inventory counts.
A 3-Step Framework for Creating & Managing SKU Numbers
Now that you know why SKU numbers are significant, let’s look at a fundamental 3-step framework for making them. Whether you’re using a manual method or POS to monitor inventory, the frame is exactly the same. And yes, you can mix numbers and letters on your SKU numbers system. Use whatever logic works for your organization.
Resource: ASAP Systems — an example of a habit SKU used together using a UPC barcode.
1. Start SKU numbers with a top notch identifier
The first 2-3 digits/characters of each SKU number should represent a top-level identifier. This may be a section, shop group, or even a supplier. For this, a quick glimpse at a SKU number defines the top-level merchandising group and place of any product on your shop. You may even use this section to identify store places if you operate more than one store.
2. Utilize the middle number series to assign unique identifiers
It’s useful to use the middle section of SKU numbers to assign unique features, such as size, colour, item type, or subcategory, to your own product; whatever make sense when organizing the products that you sell.
3. Finish SKU numbers using a successive number
Using sequential numbering (ie: 001, 002, 003) for its last series of a SKU number makes setup easy and also helps you identify older versus newer items in a product line. In some cases, linking the last collection of a SKU number to a supplier product number could be helpful too. Again, use whatever makes logical sense for the merchandise you sell.
Pro Suggestion: How Long Should SKU numbers be?
“
This depends exactly what the SKU is used for. There are different types of product SKUs. Universal product code (UPC), customized shop codes, and producer SKUs are some common examples.
In North America product codes are usually a 12 to 18 digit numerical code, fitting the standard UPC model. This version is great if the code will be printed onto a barcode and scanned using a scanner, but would not be the ideal choice if the code has to be manually typed or written out by hand.Custom SKUs are usually a shorter model and therefore are sometimes alphanumeric (containing letters and numbers). All these are great if the code needs to be manually clicked or enter with no scanner, since they’re generally easier to read and recall. It isn’t unusual for a purpose of sale or inventory management system to auto-generate a SKU number or comparable type code for a commodity. “— Caro Jang, Sales Engineer, Lightspeed POS
Now let’s look at a few examples of our SKU number framework in action.
SKU Number Example 1: Simple Top-level Identifier
Following is a simple numeric SKU number system that uses just 1 top-level identifier in a 6-digit SKU.
SKU Number Example for a Convenience Shop
| Category | Category # | SKU Numbers: Category+Sequential # |
|---|---|---|
| Dry Grocery | 01 | 010000, 010001, 010002 |
| Pet Food | 02 | 020000, 020001, 020002 |
| Snacks | 03 | 030000, 030001, 030002 |
| Canned Soda | 04 | 040000, 040001, 040002 |
| Candy | 10 | 100000, 100001, 100002 |
In the sample above, note the first two numbers represent each category of goods in the convenience store. The following 4 amounts are a sequential numbering system. As long as you don’t have over 99 departments, or over 9999 goods in a specific section, this system works and is easy to enter and keep in any POS system.
However if you would like a SKU number to convey more information about each item, another system with more identifiers is needed.
SKU Number Example 2: Versatile 2-Identifier System
Here is an 8-digit SKU number system which uses two identifiers to represent a top-level group plus an item kind for each product.
SKU Number Example for a Fashion Boutique
| Category | Code | Item Type | Code | SKU Numbers: Category+Item Type+Sequential # |
|---|---|---|---|---|
| Jeans | 01 | Straight-leg | 11 | 01110000, 01110001, 01110002 |
| Jeans | 01 | Flare-leg | 12 | 01120000, 01120001, 01120002 |
| Blouses | 02 | Sleeveless | 21 | 02210000, 02210001 02210002 |
| Blouses | 02 | Long-sleeve | 22 | 02220000, 02220001, 02220002 |
| Dress Pants | 09 | Flare-leg | 12 | 09120000, 09120001, 09120002 |
Within this sample, the first 2 numbers represent the top notch category for this particular style boutique: Jeans, Blouses, Dress Pants, etc.. Then, the next 2 amounts identify different item types such as Straight-leg; Flare-leg, Sleeveless, Short-sleeve, etc.. The past 4 numbers are simply consecutive numbers.
Note! With this system, your Item Types do not need to be category-specific. As an instance:
01120000 = Jeans (01), Flare-leg (12)
09120000 = Dress Pants (09), Flare-leg (12)
Here, Flare-leg (12) applies to more than one category as it’s a style common in both Jeans and Dress Pants. This is a really convenient SKU number system for shops that have item types, like styles or material, that cross many classes. This sort of SKU system helps employees identify key details of any product at a glance.
SKU Number Example 3: Contain a Supplier Identifier
Sometimes it’s helpful to have supplier information tied to your SKU number. If you exhibit or store products predicated on brands or providers, this 2-identifier, 10-digit SKU number system may cover all the bases. In fact, it’s how I managed my ecommerce stock for 17-plus decades.
SKU Number Example for an Ecommerce Business
| Supplier | Code | Item Type | Code | SKU Numbers: Provider +Item Type+Sequential # |
|---|---|---|---|---|
| Bentley Plastics | BP | Tumbler – Lg | 063 | BP063-0001, BP063-0002, BP063-0003 |
| US Acrylic | UA | Wine Glass | 064 | UA064-0001, UA064-0002, UA064-0003 |
| Prodyne | PD | Wine Glass | 064 | PD064-0001, PD064-0002, PD064-0003 |
| Merritt USA | MT | Dinner Plate | 166 | MT166-0001, MT166-0002, MT166-0003 |
| Tervis Tumbler | TT | Tumbler-Lg | 063 | TT063-0001, TT063-0002, TT063-0003 |
Within this type of alphanumeric SKU number system, employees can quickly determine the supplier and thing type of almost any product SKU number they encounter. Plus, being alphanumeric, it is simple for seasonal and new employees to understand and recall. As in Example #2, this system uses item types that cross multiple providers, for example:
BP063-0001 = Bentley Plastics (BP), Big Tumbler (063)
TT063-0001 = Tervis Tumbler (TT), Large Tumbler (063)
This is an especially helpful SKU number system in fulfillment warehouses where products are stocked and monitored by provider rather than merchandised in a mix, like in a retail store.
Additional SKU Number Identifiers to Consider
Above we explored how common top-level identifiers such as class and supplier can pair with item type codes to make versatile SKU variety systems. However, those are only a few of many identifiers you can use. Below are some other identifiers that may be useful for your operation.
Shop or Location Identifier
If you operate more than one shop or sell some things solely online or via fairs or markets, it is possible to also utilize a Store Identifier to set items by sales socket. Even if you don’t market in numerous places nonetheless, if you think that’s in your future, leave a placeholder with this identifier in your SKU frame. This helps for tracking sales in place or outlet, and for tracking inventory quantities per shop.
Department Identifier
Departments are wide top-level identifiers that help you monitor merchandising and store location. You can use a Department Identifier to quickly tell where an item will be found or displayed on the sales floor. If you use a branch identifier on your SKU number, you can also section sales reports by section. This is helpful in spotting troubled regions of your store. In case you’ve got a department with overall lackluster earnings, then you might have to move that segment, fix your store’s traffic flow, or enhance your featured displays in that area.
Variation Identifier
If you sell products that come in various colors or sizes, then a Variation Identifier may be a terrific help to both your customers and staff on the sales floor. Plus it lets you easily monitor which colours and/or sizes are popular. Here’s a look at how easy It’s to add a variation identifier to our sample SKUs:
01120001M = Jeans (01), Flare-leg (12), Medium (M)
09120001L = Dress Pants (09), Flare-leg (12), Large (L)
Sub-Category Identifier
For small retailers, this level can be a bit fussy, But should you would like to track inventory and sales at a very granular level, you can add a Sub-category Identifier to your SKU. By way of example, in case you have a Candy class, you are able to assign a numerical code for sub-categories such as Candy Bars, Lollipops, Boxed Chocolates, etc..
Using the Data — Put SKU Numbers to Work for You
But you design your SKU number system, a POS system like Lightspeed provides you lots of monitoring choices. As shown below, you get a massive field to assign a Custom SKU from the Add Product display, plus other fields to help organize and monitor your product data however you desire.
After products are entered in to your Lightspeed POS, then you may use different segments of your SKU numbers to pull a range of sales, inventory, and reorder reports.
Visit LightSpeed
For instance:
- Use the provider code to pull inventory counts for just one provider for a list spot-check
- Pull a sales report based on a single item type code, such as Flare-leg, to determine all sales for Flare-leg products within a period of time
- Bring a pre-order report for one department within one shop
Along with SKU-based data, systems with innovative inventory management like Lightspeed POS let you arrange products using built in Category, Manufacturer, and Custom tags. Tracking stock and sales data using both SKU amounts and built-in tags give you the coverage you want to make informed decisions every step of the way.
Establishing a SKU number system is obviously worthwhile if you want to track products and sales information in an organized manner. But if you are asking yourself if SKUs are really worth the trouble as soon as your products already arrive with scannable barcodes, here is the response before we proceed.
SKU Numbers vs. UPC Codes
UPC codes are 12-digit codes assigned by the International Standard Organization, known as GS-1. GS-1 works with manufacturers and retailers to assign and oversee the global use of UPC codes. UPC codes are placed on products by your manufacturer. SKU amounts, by contrast, are a structured stock numbering system designed to fit your unique business needs.
You certainly can use your manufacturer’s UPC codes instead of SKU numbers to track products in your system. But you’ll lose out about the many advantages of having a SKU number system tailored for your specific operation. SKU amounts that you create feature identifiers that are significant to you and your staff. With them, you can form, report, and view product data and stats based on your requirements. Supplier-generated UPC codes don’t contain consistent or unique identifiers which mean anything to your own operation.
UPC codes are useful in different ways, however. You may use them to keep present MSRP pricing and also check out the local or online competition. You might even use UPC codes to research products online or to use your mobile phone to scan UPC codes and scout for new products when shopping.
Setup SKU Numbers in a POS or Inventory Management System
The framework and illustrations we covered above should provide you a head-start about creating a SKU number platform for your company. It’s possible to produce your SKUs and monitor stock by hand in laptops or using spreadsheets, but it is far easier and more effective to use a retail POS with inventory tracking.
Our advocated POS for small and growing companies is Lightspeed. It is very cheap, starting at just $99/month for one station, and includes advanced inventory management features and detailed reports. You can add more features as you grow, too.
Here is a different look at Lightspeed’s intuitive item entry display.
As shown above, you can enter as much product data as you wish to track. However, you don’t need to spend too much time inputting data if you don’t have to track every detail. Most little shops generally need to enter only the following to get started:
- Item Name
- Custom SKU
- Manufacturer UPC or SKU
- Default Price
- Default Price
- MSRP Price
- Seller
- Reorder Point
- Low/desired Inventory Level
The Most Important Thing
SKU numbers help you organize, monitor, find, and identify inventory using a system that’s meaningful for you and your employees. Done right, your SKU numbers help you merchandise your sales floor, better serve customers, and maximize sales. Pairing a meaningful SKU number system with a feature-rich POS like Lightspeed offers you every tool you want to keep your stock and sales floor economically.
See LightSpeed
Do you use an in-house SKU system in your retail or online operation? Do you pair it with a Lightspeed POS or a similar system? We’d love to hear your insights and experiences from the comments below.
