What is an SKU Code (or SKU ID)?

The full form of SKU code is Stock Keeping Unit. It is a unique identifier for a product to record the stock quantity for the item (among other attributes). For example a retailer might want to know how much quantity he has for a red t-shirt in small and in medium size. So each of these will have a unique SKU code assigned to them and the quantity of each in the warehouse. When it comes to keeping track of inventory, one of the most common methods employed is assignment of a SKU Code or SKU Id to individual products.

An SKU is a unique item, such as a product or a service, as it is offered for sale that embodies all the attributes connected with the item that distinguish it from other items. These attributes might include but are not limited to the brand, size, colour, manufacturer or warranty. Thus, a code that holds all this information about an item gives it a unique stature in your inventory, which means that tracking and recalling a particular item becomes easy. Also, since the code holds all the relevant information about the item, someone adept at reading the code can know everything about the item without having to go and check ‘the side of the box’.

What are SKU vs UPC vs EAN Codes?

There are a few other systems that incorporate coding products for tracking purposes, like the Universal Product Code (UPC), EAN / IAN (European Article Number / International Article Number), or Global Trade Item Number (GTIN), which utilize numbered barcodes to identify with unique products in a database. These are based on a global standard defined by GS1 organisation and are of predefined length and character types (Eg, EAN-13 which contains 13 digits and UPC-A contains 12 digits). These codes have to be filed/applied for and are granted to the applicant entity after an approval process. There may also be some fees involved in the process.

The key differentiator with the SKU Code is that a retailer has the freedom to create their own SKU codes and incorporate them in the inventory system without having to adhere to a larger tracking scheme or global standard. With SKU, a retailer retains the flexibility of the length and characters in the code. This given them the ability to control the size of their inventory, changing manufacturers or wholesalers without the hassle of a system overhaul by internally mapping their product SKU codes to that of their suppliers or buyers.

Of course, the critical factor here is that the SKU codes must be well created – unique and humanly recognisable. That is, the user must be able to access all the relevant information about the product without confusion or misinterpretation through the code. So how does one go about creating good SKU codes? Let us find out through the 5 good tips that follow.

How to Create Good SKU Codes

While the most important thing is to make the SKU code unique for each variant of each product in your inventory, you should follow the following best-practices guidelines in order to ensure that they are also humanly readable and easily decipherable:

1. Make Your Own Product SKU Code

Try not to incorporate the manufacturer/wholesaler code within your product SKU code. It might seem like a good idea to just pick up the manufacturer’s code and add a few prefixes/suffixes to create your own, but it’s a bad practice. In this case, you would have to completely overhaul your coding system in case you change your manufacturer or wholesaler. It’s too much hassle.

2. Decide What You Want Your Code to Say

Decide what information you want to access through the SKU code. There is no point loading the code with information you are never going to require. The main purpose for creating product SKU codes is that you have an identifier with which you can visualize a unique product. Hence, use enough information for a successful identification of an item, but no more. For example, if the year of manufacture is irrelevant for a particular set of items, do not incorporate it in the code. It will just eat up space and would be prone to misinterpretation. Store this information under the product description tag, instead.

3. Use the Cascade Method

Create codes that are logically decipherable. For example, if you are planning to sell electronic equipment from different brands, first create a cascade chart for your information. How a cascade chart works is – start off by taking the largest set of information about your item first – in this case, ‘Electronic Equipment’ – and call it set ‘E’. Then you take the next most relevant subset, for example, ‘Laptops’. Let us call that set ‘L’. Then you ask, what brand does this laptop belong to? What model does it belong to? And so on. Keep adding attributes till you can uniquely identify that particular laptop in your warehouse using only the code. Stop adding the questions as soon as this unique identification is possible. You might need to use first 3 characters instead of just 1 to distinguish codes.

Good SKU Code Examples:

Here are a few products and their sample product SKU Codes which describe the Brands, Product, Colour and Size of the apparels.

• ChicBrand Shirt Red Small – CHI-SHI-RED-SMA
• ChicBrand Shirt Red Medium – CHI-SHI-RED-MED
• ChicBrand Shirt Blue Medium – CHI-SHI-BLU-MED
• ChicBrand Shirt Black Medium – CHI-SHI-BLA-MED (Note: In this particular case it would be indistinguishable from the one above if we used only 1 character from each attribute.)

4. Fonts and Characters

Beware of confusing characters, or homoglyphs (characters that look similar) – O and 0 (zero), I (for Icecream) and l (for leopard), etc. It might sound trivial, but the font you use to print your codes play an important part in making sure that the reader is not confused. Our advice is to use bold, serif fonts that clearly define most characters without confusion. Try not to use symbols in your SKU codes. Even though it might seem like a good idea to use the ‘/’ to create breaks within your code, you don’t want Excel auto formatting the numbers, confusing them with a date. Other characters like $ and @ are too confusing and cause formatting errors all the time.

What is the importance of SKU Code in Ecommerce?

SKU code is a critical part of ecommerce. In ecommerce, a business is usually selling on multiple sales channels such as Amazon, Ebay, Flipkart, Paytm, Myntra, Jabong, Snapdeal, Shopify, Magento and others. Under the omnichannel ecommerce they may also be selling online from their offline stores inventory.

To identify the product as the same product on all the sales channels and to link it to the correct product in the warehouse or an offline store, SKU code acts as the central identifier. There is a dire need to keep the inventory synced on all digital ecommerce platforms so that the inventory is always updated, the chances of out-of-stock orders in minimised and the sales potential is maximised by making all the inventory visible on all channels.

In Ecommerce, since the volume of B2C orders is usually high and they need to be shipped to disparate individual buyers. In order to speed up the operations in the warehouse, a business needs to follow barcoded SKU codes on products instead of relying on product images or photos to carry out the picking, packing and shipping operations. When photos are used in the warehouse operations, there is a high chance of sending incorrect products to customers which then leads to expensive product returns and replacements. Using SKU codes with or without barcodes ensures that correct products are shipped out.

Use an Inventory Management System

Use an inventory management system to store and track your SKU codes. It’s just a better way of doing things. Most of your work becomes automated, your tasks are simplified and your formats are saved and notated for future reference. As compared to storing your codes on Excel files, which are prone to corruption, damage and confusion, inventory management systems give you a cleaner, more efficient perspective at the state of your warehouse.

For example, Browntape’s Inventory Management allows you to:

• Create SKU codes for your products.
• Create and print SKU barcodes for your products.
• Bulk mapping of your own SKU codes to the ones of your suppliers for reordering products.
• Bulk mapping of your own SKU codes to the ones on third party marketplaces like Amazon, Flipkart, Magento, etc. These may or may not be the same for the same product.
• Since all the mapping are maintained, inventory and prices are updated across all sales channel online and offline automatically when sales happen or when they are reset manually.

Thus, we come to the end of our advice on SKU codes and how to create them. SKU codes are such an important part of your inventory management that you have to take proactive steps to create them efficiently. For further queries and assistance, get in touch with Browntape. We are India’s leading online inventory management system providers, and are always happy to help. Good luck with your sales!