Demystifying SKUs: A Guide to Creating an Effective Inventory Tracking System for Your Online Store

Jan 8, 2024 | E-Commerce

How to create an Effective Inventory Tracking System for your Online Store Using SKUs

When establishing a SKU system for your new online store, it’s important to understand the purpose and structure of SKUs. A SKU is a unique identifier assigned to each product in your inventory. It serves as a code that distinguishes one product from another and facilitates efficient inventory management and tracking.

The length of a SKU can vary based on your specific needs. Typically, SKUs range from 8 to 12 characters, but you can choose a length that works best for your business. Some businesses opt for shorter SKUs for simplicity, while others prefer longer ones to accommodate a larger number of products or include more specific information within the code.

While a SKU doesn’t contain detailed product information, it should be designed to provide useful insights. Consider including elements that are relevant to your business, such as product category, brand, size, color, or any other identifier that helps you identify and organize products effectively. For example, if you sell clothing, your SKU system might include codes for gender, product type, size, and color.

Example 1

Say you’re a roastery. You may have coffee bean inventory with a few variations such as the origin of the beans and the roast. Product One may be from Colombia and roasted in 3 ways: light, dark, and espresso. Product Two comes from Guatemala and get roasted as dark and espresso only. Both products then also are bagged as 2, 4, or 12 ounces either whole bean or ground. That’s alot to keep track of! So your SKUs may look something like this:

2 oz. Colombian Light Roast Ground02-COL-G-LR
12 oz. Colombian Espresso Roast Ground12-COL-G-ER
12 oz. Guatemalian Dark Roast Ground12-GUT-G-DR
12 oz. Guatemalian Dark Roast Whole Bean12-GUT-W-DR

The first two digits represent the unit size, followed by three letters as an abbreviation for the bean origin, followed by a single letter for ground or whole bean and the two letter abbreviation of the roast. Of course the order of these could be different if you were the one setting it up. The important thing is that it is consistent across all inventory items to avoid duplicate inventory listings. You wouldn’t want 12-GUT-W-DR and a listing for 12-GUT-DR-W for example as they represent the same product information, but are different SKUs and could result in inaccurate tracking and fulfillment issues later.

Clarity & Consistency

To establish your SKU system, start by defining a clear and consistent format. Decide on the elements you want to include in your SKUs and establish a naming convention that makes sense for your business. It’s important to ensure that each SKU is unique to avoid any confusion or errors in your inventory management.

Inventory Management

When implementing your SKU system, integrate it into your inventory management software or system. Associate each SKU with relevant product information, such as descriptions, specifications, pricing, and other details. This will allow you to easily locate, track, and update product information as needed.

Update & Evolve

Regularly review and evaluate your SKU system as your business grows and evolves. Adjustments may be necessary to accommodate new product categories, changes in inventory management practices, or other business requirements. Flexibility and scalability are key when designing your SKU system.

By establishing a well-thought-out SKU system, you’ll have a solid foundation for efficient inventory management, accurate tracking, and streamlined operations for your new online store.

TLDR: SKU stands for Stock Keeping Unit. It's a unique identifier to help stores keep track of inventory and variations as well as properly fulfill and ship orders. 

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