Why is it important to have SKUs in ERP software? How to form an SKU in an MRP? What are the benefits of assigning SKUs to my products?
Simply put, SKU is short for ‘Stock Keeping Unit’, an alphanumerical code representing each unit in stock. But simple is not always better or more explanatory. So, let’s dive in a little deeper.
Among the most useful tools to optimize stock organization and help responsible employees and customers to easily find products is the SKU, a unique identifier that despite its apparent simplicity, has a significant impact on the day to day workflow.
An SKU is a unique code consisting of letters and numbers that identify characteristics of each product: it’s made of different types of information and that information that the SKU consists of will depend on the characteristics and needs of each business.
How are SKUs formed?
There is no established way, each company has its own system to create a unique SKU, but there is always a specific method involved. The only thing you need to be sure of is that the SKU is consistent and easily identifiable so that each one of the employees can read it.
The references contained in the SKU number usually contain letters and numbers that facilitate identification, using the first letter of the product name, invariable numbers or letters for colors, size, etc.
If you are selling, for example, yoga pants in different sizes and colors, this is how you might want to manage the SKUs for them:
Yoga Pants, color: Pink, Size: 36, Material: Spandex – SKU: YP-P-36-S
Yoga Pants, color: Blue, Size: 38, Material: Polyester – SKU: YP-B-38-P
Companies issue their own unique SKU code that is specific to the goods and services it sells. If two companies sell the same item, such as yoga pants, they will have internally issued different SKU codes.
An SKU is not
It is often thought that SKUs are synonymous with UPC bar codes, but they are not. An SKU is an internal code that each business creates for itself. On the other hand, the UPC is the same regardless of who sells the product. Each code has variations that refer to the characteristics of the products and unlike other everyday codes such as bar codes, the SKU can be read and understood by humans. In practice, both codes complement each other.
Benefits of using the SKU
With the SKU of an item, a retailer is able to track your inventory and sales through detailed reports in real time.
Another of its great benefits is the ability to know the availability of units of a product in the warehouse. Inventory management is the main function of an SKU, but it can also improve the customer’s shopping experience, as it is able to electronically identify their stock levels (the use of such references speeds up the internal communication between the salespeople and the warehouse management, which should be as fluid as possible), which reduces the customer’s waiting time. Also, the possibilities of choosing and packing an incorrect product are reduced thanks to the SKU.
Let’s go through some ways you can benefit from using an SKU in Erpag, an ERP/MRP software that accents inventory management:
The SKU is the foundation for management of a different variety of stock. In Erpag, it can be assigned to a product, but it can also be assigned to an assembly of products or to a service. SKUs can also refer to different variations of a single product – identifying product variations with different SKUs with a small difference such regarding colors, sizes, models, etc. that are all joined together under the same Master SKU will facilitate the search, but it will also make it easier to know which one of the variants you have in stock and which one you should reorder/manufacture.
To update the product information automatically through the import options in Erpag, we recommend using the SKU code, because the system will make the correspondence between the products in stock and those that are being imported according to the unique identifier assigned to each one.
Erpag also enables you to track the Supplier SKU for your products as well as the SKU you are internally using, because sometimes, even if they are the same, they come from or have been manufactured by different suppliers or companies, and you would like to track that information: Even if the products are the same, a different SKU number containing the information about their origin will be assigned, facilitating the management of possible problems that may arise.
Additionally, in Erpag, you will be able to establish individual reorder points for each product SKU and its own variants, in this way, you will know if it is necessary to stock more stock. These measures will help maintain an adequate level of stock (On the one hand, you will never run out of stock, and on the other, you will not have more).