When a business grows large enough to keep an inventory, management needs to learn how to identify other parts within their order fulfillment center, manufacturing center, stockroom, or warehouse. This code is created with a string of letters and numbers that is called either an item number, product code, or stock keeping unit. The shorthand for this is the acronym SKU – which is pronounced “skew.” It’s the fundamental element of accurately tracking inventory. It provides a unique identification code for each item being held in stock, allowing different departments to count and monitor the flow of the item through a warehouse or manufacturing process. As an additional benefit, creating SKUs and implementing live inventory can act as an effective part of a stop-loss program. The Balance enumerates some ways that an otherwise healthy inventory can wither. Reasons for inventory shrinkage include employee theft, paperwork errors, and vendor error or fraud.
How to Create Good SKUs
Instead of entering an entire name, a combination of letters and numbers allows you to quickly access the location of the item, the number in stock and set a reordering threshold. Here are some quick tips for creating good SKUs.
- Keep it simple. A string of 4 to 8 characters will be sufficient for most warehouses. This short format allows management to use a combination of letters and numbers to describe a vast amount of inventory. However, do not ever start off SKUs with 0 as this can cause many issues with bookkeeping and inventory software.
- You’re not creating a password, so don’t use special characters. It’s especially important as these characters can confuse inventory management systems. For example, using a “/” between two numbers will cause Excel to read it as a date automatically. A “$” or “%” sign may cause serious bookkeeping program mistakes and glitches.
- Certain letters can be confused with the numbers in inventory management software. Avoid using I, L, or O when creating a SKU.
- When creating SKUs, think about how it will look in a picklist. For example, let’s say that receiving is numbering parts from Widget Co in various colors. Start off with WID101BL for widget 101 in blue, then proceed accordingly to designate other colors of widget 101. When reaching the next widget, begin with WID102.
- Don’t merely repeat the manufacturer’s numbering system. You’ll end up using numbers that are incredibly long and have internal meanings only to the manufacturer. If that number ever changes, you won’t know what to order.
- Once you have run out of an item, or if an item has been discontinued the SKU should be retired. Otherwise reusing the SKU has the potential to cause real issues in the supply chain, as well as tricking the inventory management system into thinking that the item still exists.
Get Your Tech On
Making the most of a new unit numbering system requires a few simple editions of technology. This upgrade should include a pick-to-light or PTL system which can speed pickers through filling a pick ticket in a very brief time. Additionally, barcoding equipment such as label printers and barcode readers are entirely affordable, and in some cases even available at a local big box store. Working together with barcoding equipment and Voodoo Robotics pick to light, using SKUs will make inventory management faster, easier, and more accurate.
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If the system avoids just a few mispicks, it’s paid for itself!