SKU Numbers for Small Business: The Ultimate Guide

Cody Cromwell
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What Is a SKU Number?

SKU numbers or stock keeping unit numbers are used by businesses to track and manage their inventory. The purpose of the SKU number is to uniquely identify a product or a service.

Here’s why this is important:

Every company and business- whether it’s a small chain of restaurants or global Fortune 1000 company uses a unique code or SKU number for their products and services. SKU numbers are also used by suppliers to track their inventory of goods or services. Thus, every supplier has a stock keeping unit number for their products and services. A common use of SKU numbers is to uniquely identify goods sold in a retail store.

A SKU number system (e.g. GTIN code) is used to uniquely identify an object in the supply chain and facilitate inventory control. The stock keeping unit (SKU) numbers are similar to product codes that we become familiar with.

When you shop online, you see the product number usually on the right side of the page just below the image when you hover your cursor.

SKU Numbers vs UPC Codes

If you’re running a small business, you’re going to want to look for some of the best deal around this holiday season. However, with the sheer number of deals and offers available, it’s not always easy to discern whether or not a particular offer is going to be the best one for you.

One way that entities can promote to customers while retaining their brand identity is through the use of unique product identifiers known as SKU numbers. As the name suggests, these are unique to the particular product to which they are applied.

One of the greatest features of these identifiers is that they can be used for product scanning technology. This is a huge marketing value as it gives you a surefire way of tracing and tracking the product.

Normally known for their use in sales and promotions, SKU numbers can be applied to any product. It has no bearing on the product itself as to whether or not it’s a special edition, rough or finished, big or small, and so on. It also doesn’t matter whether it’s a small business or a big company that’s presenting the SKU number.

So what exactly is SKU number?

Why SKU Numbers Are Important for Store Owners

Our focus right now is on small business owners, so that’s the information we’re providing. For a large online business, like Amazon, the process of managing SKUs (Stock Keeping Unit) is different. They don’t have to worry about physically ordering thousands or hundreds of thousands of products. Specialized software handles that.

For small business owners who have to ship the inventory to stores, that means more work. Not only do you have to get the shipments to the stores, but you also have to keep track of the items so you know what’s in stock and what’s out of stock. If you’re selling products in multiple stores, this means doing it several times over. It’s important to understand that when dealing with online stores, such as Amazon, it’s highly likely that you are dealing with multiple warehouses and each one has their SKUs. Additionally, there are two "SKUs" to consider:

SKU Number (Master SKU): This is like the item number assigned to every single product that you sell. Discounted/Deleted SKU: This is the physical number that appears on the item, which can be found on the product.

Store Appearance and Shopping Experience

There are two things that can greatly affect your chances of getting customers into your store. The first is the appearance of your store. This is something you should always work on.

The second thing you can do to increase your store’s appeal is with your shopping experience. Whatever you do, don’t imitate the norms. Take a chance with new ideas. Design something that makes sense for your customers.

Here are a few pointers that can help you create a pleasing shopping experience:

Make sure your store looks clean and inviting. The whole mood should depend on the location of the store in the mall.

Use a variety of color schemes on your walls. Would your customers relate to a more formal setting with light brown walls? Would a lighter more lively color scheme be more suitable for the store?

Make sure everything is neat and in order.

If you have a smaller store, make sure your store is divided into zones.

If you have a larger store, have a separate area for children where they can play and learn.

Your store would look more professional if you have a brochure in each section of your products.

Customer Checkout and Service

When you take an order at your local retail store, you quickly enter the customer’s information into a keyboard and then a bar code scanner picks up the entry and transfers the information to your point of sale system. Typically, you’ll perform a final check on the order before the picker puts it on a belt to be delivered to your shelves. You need to keep track of every product in your inventory and all the information associated with them, which includes the price and SKU (Stock Keeping Unit) number.

An SKU is the original product identifier assigned by the manufacturer to every item. Even though an SKU does not have any direct association with the product’s price, a customer’s entry of the SKU will most likely result in the product being added to a salesperson’s price list. So it’s important to keep the pricing information in sync with the SKU information, especially where items are sold directly by you. In addition to the price label on the product, an SKU number is usually printed on the item itself and as a label on the store’s shelves.

Inventory Management and Profits

Regardless of how good you are at inventory management, your company needs to go through the trouble of maintaining proper inventory levels, which will do wonders for profits. Too much unscheduled inventory has the ability to cause shortages and layoffs, so being able to identify a fluctuating item on your shelves can be beneficial for your company. According to Management Decision…

‘Profits depend on the use of inventory.’

The most important question to ask yourself when in need of inventory is, ‘Am I going to resell my products or store them?’ If you’re going to store the products, the size of your inventory is ultimately going to be determined by the profitability of the product. If the item is going to sell until the next batch comes in, it doesn’t matter how much is on the shelf. But if you think you’ll be clearing that shelf very soon, it may be a good idea to stock up.

In this free e-book, you’ll learn which products are the best to keep on the shelves for the longest time. However, you’ll also learn which products have the highest turnovers and which ones are a good investment.

How to Set up SKU Numbers in 4 Steps

Now that your system has been set up, you’re ready to set up your first product.

Step 3: Creating a New SKU

After you’ve set up your SKU number, you will need to create a new product.

This will be the number that you use on invoices, shipping labels, and inventory.

The best way to create a new SKU is to use the Product Information screen. To access it, just click –Customer Tags” in the upper left navigation of the system.

Note: To create a new product on the new product chart, click the product name field and select Edit New SKU.

You will need to rename the new product. To do this, type the new name in the Name field and then click Save on the top right corner.

Every function in ImportACatalog has a tool tip. You can hover over the little purple bubble in the upper right corner above each button to learn about it.

The same tool tip can be accessed by clicking the purple bubble on the lower right corner of a text box.

The blue bubble to the left of every button indicates the button’s purpose. This comes in very handy when you are creating a new SKU as it will help you remember what you need to do.

Start SKU Numbers With a Top-Level Identifier

Probably the most important thing to consider when it comes to SKU numbers is the top level identifier. This is the number that starts the SKU number, not including the letters after the hyphens.

Many small businesses find it helpful to start the SKU with the number one. This makes SKUs easier to manage in systems that require unique identifiers.

For example, if you’re a restaurant owner, and you’re looking to create a calendar in which enough tables are booked for you to break even, a good approach would be to start the SKU with the number one and then follow it with the name of your restaurant.

With this naming convention, you could create a calendar for each type of event (e.g. dinner for two, lunch for two, drinks for two) that is set up by you and then saved in another specific area so that you don’t forget on which date you should prepare the food.

Most restaurants invest in systems that can manage the information on inventory. Such systems can automatically assign SKUs for each item in the inventory. Let’s take a look at some of the most important rules when it comes to creating SKU numbers.

Use the Middle Numbers to Assign Unique Identifiers

Most of the time, it’s much simpler to assign product SKUs rather than standard product descriptions. To save time, you can use the middle number to find your SKUs.

You must always free form fill the SKUs to avoid typos and errors during the ordering process, like in the image below. Also, it will be difficult to find the product in your inventory or to perform another action if you use the standard product descriptions.

The image below shows CK products that need to be filled in the order form. The product descriptions are not helpful to the customer.

Finish SKU With a Sequential Number

Finish SKU is most commonly used with materials. Finish SKUs are used to represent products. Finish SKUs become a crucial part of the traceability and compliance process of a company. Finish SKU numbers need to be serially assigned for various products in order to find a record of every product.

To ensure accurate and traceable product sales, Finish SKUs need to be used with another numbering system such as a code, a sequence, etc. Finish SKUs are assigned a sequential number, which is also known as SKU number. This unique number serves as a means of assigning a unique ID to an item. The Finish SKU numbering system is a systematic system to assign a unique ID to items. Finish SKUs should be used in everyday business operations to record pertinent information such as the industry, market price, and stock information. Finish SKUs are used to ensure that products are accurately identifiable and are traceable. Finish SKUs should be serially assigned.

Although Finish SKUs can be consistently assigned to products, they can be assigned serially in the following manners:

Add SKUs to Your POS or Inventory Management System

Most inventory systems and point-of-sale (POS) systems support a wide variety of inventory items and items can carry many different SKUs. An SKU is a number or code that helps to uniquely identify an item. Each part of the item, such as its price, is also stored in the system, allowing the system to calculate pricing.

Inventory systems make use of a SKU list to make sure that items are identified and added to orders correctly. Having an SKU list in the inventory system ensures that the right items can be delivered to a customer and that customer’s orders are lined up properly.

Locations using inventory management system generally don’t worry about the inventory system selecting an SKU number for an item. POS systems usually have a default selection that will work in most situations.

When in doubt, ask the customer for what they have. List the item as they have identified it on their receipt, rather than assigning an item a random number. This allows you to quickly search for the right product, and assists inventory management systems.

When you do need to choose an SKU number, consider what price point the item is located for and what the item’s characteristics are that make it similar to a particular product.

SKU Number Examples

Every business has SKU numbers for each product you sell. Their purpose is to make sure that only the products you’re selling are deducted, and that is why listing out these numbers on your invoices is required.

A SKU number is spelled out using the following format.

SKU =. (Country code) + (state addressees) + (City name) + (Suffix)

For example, a SKU number for a product in America may look something like this.

SKU=US1S0003

In this instance, the SKU number begins with the letters US. This represents the US country code. Therefore, customers from other countries will take this into account when looking for the appropriate price. Once the country is out of the way, 001 is the serial number and the next 3 is the number of the SKU. When this SKU numbers is purchased, the customer will receive the first ever of the product from the quantities available.

The letter S comes after the number because the SKU number has to be unique to the entire product category. For example, you wouldn’t need to do a serial number for a T shirt, but the shirt still has a SKU number that is unique to the product line.

SKU Number Example 1: Simple Top-Level Identifier

(SLI)

As long as we don’t have any additional SKUs, the product name (in this case, Deck Stain) by itself is a definitive identifier that can be used as a SKU. When we add more descriptors to the name … for example, in this example, Deck Stain 2 … the name becomes a descriptive identifier and can be further broken down into multiple SKUs.

Example 2: Product Name and More Details (Example of a Reference Code)

Here’s Deck Stain 2 expanded with details. These details are an additional way to provide more information about the product, but they don’t deter from the simplified strategy outlined in Example 1. Our 2nd level is also the same as our 1st level … the product name. The 2nd level is another descriptive identifier.

Example 3: Product Name and More Details (Example of a Composite Code)

SKU Number Example 2: Versatile 2-Identifier System

A company not only manufactures a product, but they also make several variants. They use a 2-sku structure that provides up to 15 name/number combinations for a single SKU. Figure 9, below, displays a 2-sku system.

This system is also known as a 2-level sku system, and it is a very versatile system that accommodates many unique situations. Named SKUs are meant for semi-specialty items, such as laptops, blenders or toasters. Identifier SKUs are used for items such as tape, duct tape and office supplies.

The unique part about this system is that the two types of SKUs can be shared with each other. For example, a customers may order an iPad with a special 3-number SKU and add a different 3-number SKU to their order. The company’s system then effectively provides them with a total of three name/number combinations:

  • iPad SKU
  • iPad 3-SKU
  • Customers SKU

An identifier SKU is a very versatile identifier. It can be shared with names and numbers since they aren’t being sold directly. For example, if a customer’s company orders 30 boxes of duct tape, the identificer SKU can be used to signify that a shared box allocation has been used.

SKU Number Example 3: Include a Supplier Identifier

In summary, the consumer has a great advantage to understanding their purchase. SKU is an important identifier number that suppliers and retailers use to aid in the identification of goods, goods in process, manufacturing, and unit of sales.

It is important to include several SKU numbers in various places when starting a manufacturer or distributor. For example, now that you have several SKU numbers, you want to include the product and manufacturer or supplier numbers in order to keep all the information organized.

For instance, your company may have a contract with a manufacturer to supply their product. In this instance your company may include the company name and SKU information, when you sell the product to your customers, you would include the manufacturer name for the item being sold as well as the SKU information.

This will allow your customers to clearly see who the manufacturer is and make it easier for someone to identify where the product originates from.

Before you begin including SKU numbers in your documentation, it is important to also include other elements such as the total piece count, color and material combinations.

Once again, your company may wish to include this information in the documentation but may only want it to be available to the supplier when product labeling or shipping information is necessary. This method is common with smaller manufacturers or distributors.

Other SKU Number Identifiers to Consider

While UPCs, GTINs and EANs (as well as many others) are the most commonly recognized global identifiers for retail and wholesale sales, you might not always be dealing with this type of number. One of the biggest advantages of SKU numbers is that they’re a more extensive method of identification than just the product itself. In some ways, they’re a microcosm of the entire sales system and can easily identify the manufacturers, countries, warehouses, forces, dates and warehouses associated with those who distribute a product.

In a perfect world, if you’re looking to establish your business internationally, you’d want to contract with companies that understand this approach and can help facilitate language translation and a more detailed product hierarchy. These companies will also be able to help you establish relationships with various vendors so that you can take advantage of the widest possible marketing opportunities.

There are also companies that offer these types of services for a fee. This is a bit more of a niche marketing approach and might not be ideal for all small businesses.

Even if you aren’t considering international wholesale distribution, there is still plenty to be learned from taking a look at the companies that produce your product.

Tips for Creating a SKU Number System

Many small business owners are stuck without a proper inventory system. A system, in this case, is a policy of tagging leads, contacts, and products with a unique SKU. A SKU is a stock keeping unit, but it can be anything you want it to be. But small businesses often see a need for a simple automated, simple system. A system that will collect and organize your data. A system that will produce and send out a piece of paper to you with the SKU’s on that paper.

A SKU Number System will provide you with that piece of paper. You can use a spreadsheet, an excel file or even a Google document. And then you can output that SKU number into an e-mail template. You can do all that by hand.

Paying someone to do it for you is an option as well. So is finding a free template online and adding your data to that. Or you can find a third party company that will build a system like that for you. But even still, it is an overwhelming process.

I’ve tried it all in the past and then I found the solution. It’s called a SKU Number System. It’s a system used for backing up your records with inventory. It’s usually software or hardware based and provided by a company that does inventory management.

Bottom Line

Up Front:

Your SKU is a business asset. Like an accounting financial asset, you can allocate costs to it, increase revenue by extending its life and even increase it neither competes against or compliments your other SKU’s sales.

I work with new small businesses on an almost daily basis. With the acceleration in today’s business world, my first piece of advice is, … get an SKU number.

More than simply keeping track of your produce, this number will serve as a permanent online numbering system for your business needs. From tax numbers to catalog numbers, email addresses, website URLs, this integration will serve as a single point of access to all the information you need to keep track of your business.

Moreover, it will serve as an essential aid when you begin interacting with your target market. Being able to dictate a website, catalog and marketing material based on a single number will keep you focused on your bottom line. You will have the ability to control how you target your audience, providing you with direction that is unique to your business.

While I’ve done my best to describe how you can use it, it’s important to understand that you will want to enlist the aid of a tax accountant or business attorney to fully understand how it will serve your business in all of its facets.

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