What is a Stock Keeping Unit (SKU)?
A Stock Keeping Unit, also known as a SKU, is a unique identifier for the product that is sold at the Point of Sale. It is used as the identifier to track the sales, inventory and purchase orders for a product.
There are various mechanisms to generate SKUs for your business, each with different benefits and levels of sophistication required to maintain. Below are the common approaches for SKU generation.
Three approaches to generating SKUs
1. Auto-Increment
This is the simplest way to create a unique identifier for a product. In this mechanism, each size level variant of the product is given a unique identifier.
Example: 123456
Pros
- Simple to generate
Cons
- Requires a central system to generate the SKU
- Doesn't give you any information on the product
- It makes it hard for an external system to generate this identifier, since everything relies on a central authority to generate the identifier
2. Smart SKUs
In this approach, a SKU is generated based on the different attributes of the product. The most common approach for Smart SKUs is to concatenate style name, color name and size name.
Example: delancey-white-xs
In this approach, `delancey` is the style name, and this SKU is defining the white and XS variant of this style.
Pros
- Simple to generate
- Very explicit on what the product is
- Can be generated by an external system
Cons
- Non numerical SKU, which could require another numerical identifier for some systems
- It makes it hard for an external system to generate this identifier, since everything relies on a central authority to generate the identifier
3. Smart Numerical SKUs
In this approach, a SKU is generated based on the different attributes of the product, but each attribute is mapped to a number for SKU generation.
Example: 120214123
This SKU represents more detailed information. Below is a way to look at it in a more extended form:
120-21-4-12-3, where
- 120: is the style #
- 21: is the year the style is introduced in
- 4: is the quarter the style is introduced in
- 12: is the color code
- 3: is the size code (say M)
This example is meant to be directional, and you can use the same attribute to number mapping for different attributes that you might want to track.
Pros
- Simple to generate
- Numerical SKU, so will be supported by most retail-tech systems
Cons
- Requires a specific level of familiarity to interpret what the SKU means
- Requires a central system to generate the unique style identifiers
A SKU generator can make a big difference and eliminate pain points in your planning workflows. Assortment Planning software like Toolio can help you automate this. If you’d like to learn more about how Toolio can help you streamline your processes, schedule a demo with our team today!
