Stock-Keeping Unit (SKU)

Definition

A stock-keeping unit (SKU) is a unique identifier assigned to each distinct product or service that a business offers. It serves as a way to track and manage inventory, sales, and other important business metrics related to the specific product or service.

5 Must Know Facts For Your Next Test

1. Each SKU is a unique code that identifies a specific product or service, often including information about the product's characteristics, such as size, color, or model.
2. SKUs are used to track inventory levels, monitor sales, and generate reports on product performance and profitability.
3. Accurate SKU management is crucial for effective inventory control, as it allows businesses to quickly identify and locate specific products, prevent stockouts, and optimize ordering and restocking processes.
4. SKUs are commonly used in retail, e-commerce, and supply chain management to streamline operations, reduce errors, and improve customer service.
5. The use of SKUs enables businesses to better understand their product mix, identify best-selling items, and make informed decisions about product assortment, pricing, and marketing strategies.

Review Questions

• Explain the role of SKUs in inventory management and how they contribute to efficient business operations.
  • SKUs play a crucial role in inventory management by providing a unique identifier for each product or service. This allows businesses to track inventory levels, monitor sales, and generate reports on product performance and profitability. Accurate SKU management enables businesses to quickly identify and locate specific products, prevent stockouts, and optimize ordering and restocking processes. The use of SKUs helps streamline operations, reduce errors, and improve customer service, ultimately contributing to more efficient and effective business operations.
• Describe how the use of barcodes and product catalogs are related to the management of SKUs.
  • Barcodes are often associated with SKUs to facilitate efficient inventory tracking and checkout processes. By linking a unique barcode to each SKU, businesses can quickly and accurately identify and track individual products throughout the supply chain. Additionally, the product catalog, which is a comprehensive list of all the products or services a business offers, typically includes SKU information. The product catalog is an important tool for managing inventory and sales, as it provides detailed information about each product, including its SKU, characteristics, pricing, and other relevant details.
• Analyze how the effective management of SKUs can inform business decisions and strategies, such as product assortment, pricing, and marketing.
  • The effective management of SKUs provides businesses with valuable insights that can inform a wide range of strategic decisions. By tracking sales data and product performance at the SKU level, businesses can better understand their product mix and identify best-selling items. This information can then be used to make informed decisions about product assortment, pricing, and marketing strategies. For example, businesses can use SKU data to optimize their product offerings, focusing on the most profitable and popular items, and adjust pricing to maximize revenue and profitability. Additionally, SKU data can inform targeted marketing campaigns, allowing businesses to promote specific products to the most receptive customers. Overall, the insights gained from SKU management can help businesses enhance their competitiveness, improve customer satisfaction, and drive long-term growth and success.

Related terms

Inventory Management: The process of ordering, storing, and using a company's inventory, including raw materials, components, and finished products. Effective inventory management is crucial for maintaining optimal stock levels and meeting customer demand.

Barcode: A machine-readable representation of data, typically used to identify and track items in a retail or warehouse setting. Barcodes are often associated with SKUs to facilitate efficient inventory tracking and checkout processes.

Product Catalog: A comprehensive list of all the products or services a business offers, typically including details such as product descriptions, pricing, and SKU information. The product catalog is an important tool for managing inventory and sales.