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Understanding Stock Keeping Units (SKUs)

How to use Stock Keeping Units to organize your inventory

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What are Stock Keeping Units

Here is an example

 

What are Stock Keeping Units

To keep order fulfillment and tracking simpler, merchants need a way to group their inventory articles, and this is when Stock Keeping Units (SKUs) come in. SKUs are a commonly used categorization method in the field of inventory management to simplify the order fulfillment and tracking processes.

  • SKUs are used to track and group your inventory assets.
  • Use an SKU to define a distinct type of asset in your inventory.
  • Each article in your inventory will belong to one SKU.
  • One SKU can hold several articles.
  • Track your inventory articles by defining the SKU as Individual or Bulk.
  • A Stock Keeping Unit (SKU) is the unique identifier you assign to a group of your inventory Articles that share certain specifications.

Businesses may have different ways to use Stock Keeping Units, depending on the complexity of their inventory and their business requirements.

Here is an example

A bike shop offering rentals may have city bikes from two different manufacturers in their inventory.

Still, essentially, they both serve the same purpose and have the same price - in this case it does not matter for the customer or the business which manufacturer's bike is used to fulfill the order. Therefore, the bike shop might combine the bikes from both manufacturers under the same SKU.

Even though the shop would group the bikes from two manufacturers under the same SKU, each article still has its own ID or article number. This way the shop can still store information, including the manufacturer's brand, bike model, color, etc., and track the usage on an article level.

SKU for articles without difference:

Two bikes from manufacturer 1 and two bikes from manufacturer 2 can be stored under the same SKU "CIT-BIK"

 

SKUs for articles with a difference:

However, product variations are one example of a need for two separate SKUs. Let's say the bikes come in different sizes - one for adults and one for kids. In this case, the shop needs to have two different SKUs to distinguish the articles in various sizes from each other.

Four adult bikes are stored under the same SKU CI-BI-AD, without distinguishing between the two manufacturers. Additionally, 4 kids bikes are stored under the SKU CI-BI-KI again not distinguishing between the manufacturer

 

Of course, it is also possible to create separate SKUs for both manufacturers' bikes depending on the size (adult bike of manufacturer 1, adult bike of manufacturer 2, kids bike of manufacturer 1, kids bike of manufacturer 2) when it makes sense. It is up to you and your business requirements to decide how fine-graded you want to create and maintain your SKU structure.