As your warehouse receives bigger order volumes and experiences longer product lines, SKU management becomes more important. Mismanagement of SKUs can quietly ruin warehouse efficiency by creating inventory inaccuracies, delayed shipments and, ultimately, frustrated customers. .
In this article, we will explore SKU management and share best practices for improving it in your warehouse, whether you’re running a high-volume e-commerce operation or managing retail fulfillment across multiple channels.
What Is A SKU?
SKU, which stands for Stock Keeping Unit, is a unique code assigned to a specific product. It is used to identify, locate, and differentiate items in a warehouse. SKU code is a combination of letters and numbers that represent the characteristics of a specific product.
For example, let’s say you sell bedsheets. If two are the same product, they will have the same SKU. If you introduce a variant, like a bedsheet for a king-sized bed, you need another SKU to differentiate it from the original two.
So, the more variants you have, the greater the need for a system of differentiating them. In the table below, you’ll see how you can generate SKUs for products with variants just like in our example:
| Storage location | Code | Item type | Code | Item make | Code | Item size | Code | SKU |
| Household items | HI1 | Fabric | FB | Linen | LN | King size | KS | HI1FBLNKS |
| Household items | HI1 | Fabric | FB | Linen | LN | Queen size | QS | HI1FBLNQS |
| Household items | HI1 | Fabric | FB | Cottom | CT | Queen size | QS | HI1FBCTQS |
| Household items | HI1 | Furniture | FN | Wood | WD | 35” | 35 | HI1FNWD35 |
Now, thanks to the SKUs, you can locate, pick, and package an item using automated warehouse systems or even manually; just store all items with the same SKUs in the same storage compartment.
What Is SKU Management?
SKU management, as part of inventory management, is how companies identify, organize, and track units using the 8-digit alphanumeric codes. The sole aim of SKU management is to ensure you can tell two similar items apart and prevent errors during picking, packing, or inventory tracking.
What SKU Management Can Bring to Any Warehouse
Smaller family-run warehouses or legacy or bulk storage operations still sometimes use informal systems like handwritten logs (“pallet 3 from last Tuesday’s shipment”), basic manufacturer codes, or lot numbers to track inventory. Relying on these practices is becoming rarer for a reason: going to an SKU system and managing it well avoids errors and delays and frees up a warehouse and a business to grow.
Here is what a warehouse gets by installing or improving SKU management.
- Enhanced warehouse organization
With every item in the warehouse given an SKU, warehouse managers and operation leads can organize the warehouse so that specific SKUs in high demand are kept in a specific location. Warehouse workers can also group an SKU together, optimizing the warehouse location based on demand, size, and other factors, maximizing storage capacity.
- Reduced errors in order fulfillment and lower return costs
Enough with the painful task of carrying out a return request due to a wrong order. A defined system of identifying products accurately ensures that orders are correct, reducing returns. SKU management can eliminate the chance of packaging the wrong order, allowing the order fulfillment team to type in an SKU or walk straight to the designated location to pick the correct SKUs.
- Optimized labor management
With SKUs in place, operation leads can streamline tasks like picking and packaging, reducing labour costs and allocate workers freed up by the new efficiencies to other aspects of the business.
- Improved inventory management
With SKU management, warehouse managers can maintain accurate data on stock levels and reduce the risk of overstocking or stockouts. Being able to track sales and inventory leads to more accurate demand forecasts.
6 Ways to Improve SKU Management in Your Warehouse
If you’re struggling with organizing and managing your SKUs, these tips will help.
- Create a logical and succinct SKU system
Your SKUs should be descriptive enough and just make sense by following these rules:
- Avoid misspellings or any other form of confusion
- Break your SKU into chunks and make sure the important details are identifiable without having to cross-reference
- First decide on your primary SKU identifier—usually product category (ELEC for electronics) or department code—then create a hierarchy with product type and unique identifiers for size, color, etc.
- Keep the SKU characters within 8-12 characters. The numbering system is the first level of control for improving the system.
- Automate SKU management with the right WMS
Human error is one of the major issues in warehouse operations. Automation takes care of this problem. You need automation technology to accompany your SKU management practices, likely a warehouse management system like Da Vinci. It has an advanced inbuilt inventory management system that generates SKUs and allows barcode scanning.
- Set reorder points for each SKU
With inventory and order management, you can set reorder points for each SKU. This way, you never run out of products and have an accurate estimate of the products to stock up on. An advanced inventory management system with real-time sales data and demand forecasting can determine accurate reorder points by SKU.
- Rationalize your SKUs
You can streamline your product line by reducing the number of SKUs you have to improve the profitability of your product mix. If you have fewer high-demand SKUs, save money on storage and handling costs by phasing out low-performing goods. This way, you have a more defined and succinct SKU numbering system.
- Leverage data feedback to optimize SKU performance
An inventory management system that oversees key SKU metrics helps you know which SKUs to scrap, which ones need adjustments, and which ones to stock up on. Such decision-making metrics include: sales history, average daily units sold, profit margin, stock levels, order tracking, and items in transit.
Stock Keeping Units (SKUs) vs. Universal Product Codes (UPCs)
SKUs differ from UPCs in use, representation, and even customization. SKUs are alphanumeric characters unique to the retailer and only significant in internal operations. UPCs are black lines and digits encoded in a barcode and are used externally to track products across the supply chain.
How Da Vinci’s WMS Simplifies SKU Management
Da Vinci Unified’s software simplifies SKU management through a combination of advanced WMS features and tools:
- Its centralized inventory management system offers a unified view of all SKUs, provides consistent SKU insights, and reduces the possibility of misnumbering or duplicates in the system.
- Its storage optimization features assign SKUs the best pick-up zones based on speed and order frequency, reducing the need for workers to burn energy and speeding up fulfillment, improving customer satisfaction.
- It integrates easily with ERPs, TMS, OMS, and e-commerce platforms, ensuring that SKU data is accurate.
Da Vinci influences SKU management by automating other warehouse operations, leading to scalability and efficiency in SKU handling and tracking.
Gain Full Control Over Every SKU with Da Vinci’s WMS
Da Vinci Unified is a valued addition to any warehouse or order fulfillment business, especially one that is growing and constantly expanding its variety of products. Understanding the software’s feature set, warehouse managers gain visibility of every SKU in the warehouse while balancing stock levels through automated order replenishment tools.
Take control of warehouse operations and even the seemingly small details like SKUs with Da Vinci today. Request a demo and explore the freedom associated with automated logistics systems.