Tracking Stock Keeping Unit (SKU) numbers is essential for efficient inventory management, enabling businesses to monitor product movement, manage stock levels, and optimize operations. The most effective methods involve leveraging technology and establishing a clear system for product identification.
Understanding SKU Tracking
An SKU is a unique alphanumeric code assigned to each distinct product or service variation within a business's inventory. Unlike a Universal Product Code (UPC) or barcode, which is universal and product-specific (e.g., for a specific brand and item), an SKU is internal and tailored to a company's specific product attributes (e.g., a blue large t-shirt vs. a red small t-shirt of the same model). Effective SKU tracking allows businesses to precisely monitor stock levels, sales trends, and product movement from the moment items enter to when they leave a warehouse or store.
Core Methods for Tracking SKUs
There are two primary technological approaches to accurately track SKUs as products move in and out of a warehouse or inventory system:
Inventory Scanners
Inventory scanners are handheld or fixed devices that read barcodes or QR codes associated with SKUs. When an item is received, moved, or shipped, its unique code is scanned, and the information is instantly updated in the inventory system.
- How they work: Each product or carton is tagged with a barcode representing its SKU. When a transaction (e.g., receiving, picking, shipping) occurs, the scanner reads this barcode, which then communicates the action to the central inventory management system.
- Benefits:
- Increased Accuracy: Reduces human error associated with manual data entry.
- Speed: Accelerates inventory counts, receiving, and shipping processes.
- Real-time Updates: Provides immediate data on stock levels and location.
- Efficiency: Streamlines warehouse operations and reduces labor costs.
- Types: Common types include handheld barcode scanners, mobile computers with integrated scanners, and fixed-mount scanners used in automated systems.
Inventory Management Software (IMS)
Inventory Management Software serves as the central hub for all SKU-related data. SKUs are input into this software, which then manages their status, location, and movement throughout the supply chain. This software can be standalone or part of a larger Enterprise Resource Planning (ERP) system.
- How it works: SKUs are initially created and input into the software, often incorporating specific product characteristics. The IMS then tracks every transaction involving that SKU, from procurement and storage to sales and returns. It often integrates directly with inventory scanners to automate data capture.
- Key Features for SKU Tracking:
- Real-time Stock Levels: Provides an accurate, up-to-the-minute view of available inventory.
- Location Tracking: Pinpoints where each SKU is stored within a warehouse or across multiple locations.
- Order Management: Connects SKUs to sales orders, purchase orders, and fulfillment processes.
- Reporting and Analytics: Generates insights into sales trends, popular items, slow-moving stock, and more.
- Automation: Automates reorder points, stock transfers, and other routine inventory tasks.
- Integration: Can integrate with e-commerce platforms, POS systems, and shipping carriers.
- Benefits:
- Comprehensive Control: Offers a holistic view and control over the entire inventory lifecycle.
- Data-Driven Decisions: Provides analytics to optimize purchasing, pricing, and marketing strategies.
- Scalability: Supports business growth by efficiently managing larger and more complex inventories.
- Cost Reduction: Minimizes overstocking, stockouts, and carrying costs.
The Foundational Step: SKU Classification
Before implementing any tracking system, the initial and crucial step is to determine the best way to classify your inventory by its characteristics. This structured approach ensures that each SKU is uniquely identifiable and that the tracking system accurately reflects product variations.
This classification process involves breaking down each product into its core attributes to create a unique identifier. For example, a T-shirt might be classified by:
- Product Type: TEE
- Brand: ABC
- Model/Style: URBANFIT
- Color: BLK (Black)
- Size: L (Large)
This results in an SKU like ABC-URBANFIT-BLK-L. A consistent naming convention based on these characteristics is vital for both manual readability and system integration.
Example SKU Components Table
| Attribute | Example Value | Description |
|---|---|---|
| Brand Code | ABC | Identifier for the product brand |
| Product Type | TEE | Categorizes the item (e.g., Shirt, Pant) |
| Style/Model | URBANFIT | Specific design or model of the product |
| Color Code | BLK | Abbreviation for the product's color |
| Size Code | L | Abbreviation for the product's size or dimension |
Practical Steps for Implementing SKU Tracking
- Develop a Consistent SKU Naming Convention:
- Define clear rules for creating SKUs that incorporate relevant product attributes (color, size, material, model, etc.).
- Keep them logical, unique, and easy to understand. Avoid confusing characters.
- Assign Unique SKUs:
- Every single variation of a product (e.g., different sizes or colors of the same shoe model) must have its own distinct SKU.
- Implement Barcoding:
- Generate and print barcodes for each SKU. These can be internal barcodes or industry-standard ones.
- Attach barcodes clearly to products, packaging, or shelves.
- Choose the Right Tracking Tools:
- Inventory Scanners: Select scanners that fit your operational needs (e.g., handheld for mobility, fixed for high-volume areas).
- Inventory Management Software: Invest in IMS that scales with your business, integrates with other systems (POS, e-commerce), and offers the features you require.
- Initial Data Entry:
- Accurately input all existing inventory and their corresponding SKUs into the IMS. This may involve a physical inventory count.
- Establish Workflows:
- Train staff on standard operating procedures for receiving, stocking, picking, and shipping products using the new SKU tracking system.
- Regular Audits:
- Perform cyclical or annual inventory audits to reconcile physical stock with system records and identify discrepancies.
Benefits of Effective SKU Tracking
Implementing robust SKU tracking processes offers numerous advantages for businesses:
- Improved Inventory Accuracy: Real-time visibility into stock levels minimizes discrepancies between physical and recorded inventory.
- Optimized Stock Levels: Prevents overstocking (reducing carrying costs) and understocking (avoiding lost sales due to stockouts).
- Faster Order Fulfillment: Efficient tracking allows for quicker location and picking of products, speeding up order processing and delivery.
- Enhanced Sales Forecasting: Detailed SKU-level data provides insights into product performance, enabling more accurate demand prediction.
- Reduced Shrinkage and Loss: Better accountability and tracking reduce instances of misplaced or stolen inventory.
- Streamlined Operations: Automates many manual processes, improving overall warehouse and supply chain efficiency.
