Understanding stock keeping units (SKUs)

Stock Keeping Units (SKUs) are a foundational element in inventory management, serving as a systematic method for categorizing and tracking merchandise. SKUs simplify order fulfillment and ensure efficient tracking of various inventory assets.

What Are SKUs?

• Definition: An SKU is a unique identifier assigned to a group of inventory articles that share specific characteristics.‍
• Function: SKUs facilitate the tracking of inventory assets, making it possible to manage different types of items as a unified group.‍
• Usage: Every article in the inventory is associated with one SKU, and each SKU can encompass numerous articles.‍
• Tracking Method: Determine whether each SKU should be tracked individually or in bulk, depending on the needs of your business.

Examples of SKU Implementation

Unified SKU: A bike rental shop may combine city bikes in different colors under a single SKU if they serve the same purpose and have the same price. Essentially it won't matter to the customer if they rent a green or a yellow bike for a day in the city. Even though grouped up under one SKU, each bike retains a unique ID or article number, so relevant information like rental usage can be tracked for each bike individually.

Example SKU "CITYB" holds 2 green and 2 yellow bikes.

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Differentiated SKUs: For different product characteristics that serve different purposes, like the size of an item, separate SKUs become necessary. For instance, when renting out bikes in different sizes, it is important to distinguish between adult and kids' bikes. To achieve this, learn more about creating product variants.

Example SKUs: "ABIKE" for adult bikes and "KBIKE" for kids' bikes, irrespective of the color.

Customizing SKU Structure

The granularity of your SKU structure should align with your business model and operational requirements. You may choose to have distinct SKUs for different colors or sizes or keep them broader based on the product's function and use.

Implementing an effective SKU system is essential for maintaining a well-organized inventory, which directly impacts the efficiency of order processing and customer satisfaction. Whether for sales or rental, the right SKU strategy can significantly enhance your business operations.