A big chunk of success of an eCommerce business comes from how well the order fulfillment process is done and how well the stock is maintained. Yes, you can have an aesthetic, easy-to-use website and a large, global customer base, but if your customers are not happy with their orders and the whole experience, you’ve got yourself a big problem.

Whether your business is big or small, you need to have a proper system to track, maintain and organize every product in your inventory. Using a detailed and organized SKU system is your best bet.

SKU simply stands for “stock keeping unit” and it’s a system where a unique number or ID is assigned to each product in your inventory. The SKU number will have all the relevant information one needs to know about that particular product such as brand name, product type, the target demographic, model number and more. The whole idea is to get every information you need about the product at a glance.

The way the SKUs are created depends on the purpose and the eCommerce business. Usually they will be 8-12 characters long and it’s advised to avoid starting the SKUs with 0 as most systems discredit 0. Below is an example of a SKU.

Why Do You Need SKUs?

Say, for example you sell a red t-shirt from a brand that is available on other eCommerce platforms as well. The SKU you have set for your product will make it easier to differentiate it and easily recognizable.

If you have inventory scattered across multiple warehouses, SKUs make it easier categorize, manage and track the inventory without having to break your head or spend too much time. It also helps keep track of the products sold, the products that are in high demand and the ones that are low on sales, allowing you to develop your strategies efficiently.

The most common benefits of having SKUs include:

• Inventory Analysis: Having a SKU system helps in analyzing the profit margin, sales trends, profit and demand forecasting etc.
• Inventory Management: Any product that comes in, or goes out will be recorded when you have an SKU system implemented. This not only helps in increasing your sales and making better business decisions and marketing strategies, but also in ordering the exact quantities of products and reducing dead stock and obsolete inventory.
• Customer Assistance: No matter how much you try to create an efficient shipping strategy, some damages and missing products are inevitable. When you know the SKU of a product, you can track and assist your customer in a better manner, including effective returns and replacements.
• Product Recommendations: One of the effective marketing strategies used by eCommerce websites is product recommendations. When customers add a certain product to the cart, you can recommend them similar products with the help of SKUs.

Benefits of SKUs

Track Your Inventory Accurately and Efficiently

• You might have three shirts of the same color, but different brand. SKUs help differentiate products from one another
• When you have a large inventory, having SKUs makes it easier to search for products and product information
• Optimizes warehouse management and shipping, reducing damages and errors
• If you have multiple warehouses across different locations, SKUs help in identifying the exact location of the products making order fulfillment easier and faster
• With the help of SKUs, you can avoid out-of-stock situations even during peak, or holiday seasons

Forecasting Demand and Customer Behavior

• Helps in product tracking and customer behavior, offering more data on which products sell more and which of them are slow moving
• Help identify slow-moving and fast moving items, helping to order the exact quantities needed for each product. This prevents inventory shrinkage, excess inventory, dead stock and reduces warehousing costs
• With SKUs, you can identify which products each customer buys frequently and offer them product recommendations of high-priced, premium products or complementary products that are purchased together, giving you a competitive advantage
• Helps in offering customized customer experience based on their past purchases and searches
• Re-stocking the products on time and tracking the inventory efficiently helps in customer retention as well

Generating Your SKUs and Implementing a System

SKUs are generated usually using a SKU generating system that can be bought and customized to your purpose and needs. But when you have a large inventory and multiple warehouses, this process can get daunting and free generators might not help you achieve the results that you are seeking. That is why partnering with a 3PL fulfillment partner is your best bet.

At ShipBots, we have the knowledge, tools, and resources that could help you generate SKUs, manage them, and track them all within our inventory management software. Whether you are a small eCommerce business just starting out, you're expanding, or you are an established business with multiple warehouses across the globe, we are equipped to handle them all. We can help you with your order fulfillment, inventory management, warehousing and shipping strategies so that you can focus on the other important aspects of your business without breaking your head or spending too much time on managing your inventory. Get in touch today to learn how we can facilitate your SKU tracking and warehousing processes.

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