Stock Keeping Unit (SKU)

Definition

A Stock Keeping Unit (SKU) is a unique identifier assigned to a specific product or item in inventory, used for tracking and managing stock levels. SKUs help businesses categorize products, streamline inventory management, and enhance sales tracking by providing detailed information about each item, including its attributes like size, color, and price. This systematic identification aids in efficient inventory control systems and models.

5 Must Know Facts For Your Next Test

1. SKUs are typically alphanumeric codes that provide specific details about the item they represent, aiding in precise inventory tracking.
2. Using SKUs can significantly reduce the time spent on inventory counts and product management by enabling quick searches and organization.
3. Effective SKU management contributes to better forecasting and replenishment strategies, preventing stockouts and overstock situations.
4. Retailers often analyze SKU performance data to make decisions on product assortment, pricing strategies, and promotions.
5. Different businesses may have varying formats for SKUs, but the core purpose remains consistent: to uniquely identify and manage inventory items.

Review Questions

• How do SKUs enhance the efficiency of inventory management systems?
  • SKUs enhance inventory management efficiency by providing unique identifiers for each product, allowing businesses to track stock levels accurately. This systematic categorization reduces the time needed for inventory audits and makes it easier to locate specific items. Moreover, SKUs facilitate better forecasting and stock replenishment processes by allowing businesses to analyze sales patterns based on specific products.
• Discuss how the use of SKUs can impact sales strategies in retail environments.
  • The use of SKUs allows retailers to analyze product performance at a granular level, helping them understand which items sell well and which do not. This insight enables retailers to adjust their sales strategies effectively by optimizing product assortments, managing promotions based on performance data, and ensuring that popular items are adequately stocked. Consequently, effective SKU utilization can lead to increased sales and improved customer satisfaction.
• Evaluate the role of SKUs in supporting advanced inventory control models such as Just-In-Time (JIT) or ABC analysis.
  • SKUs play a critical role in supporting advanced inventory control models like Just-In-Time (JIT) or ABC analysis by providing essential data needed for precise inventory management. In JIT systems, having accurate SKU information ensures that products are available when needed without excess stock. Meanwhile, ABC analysis relies on SKUs to categorize inventory based on importance or value, enabling businesses to focus their management efforts on high-priority items while efficiently controlling lower-priority stock. Overall, effective SKU usage is fundamental for optimizing inventory control strategies.

Related terms

Inventory Management: The process of ordering, storing, and using a company's inventory, ensuring that the right amount of stock is available at the right time.

Barcode: A visual representation of data that can be scanned to retrieve information about a product, often linked to its SKU for quick identification.

Product Lifecycle: The stages a product goes through from introduction to growth, maturity, and decline, influencing inventory strategies and SKU management.