Stock Keeping Unit (SKU) – Definition

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Stock Keeping Unit (SKU) Definition

A stock keeping unit (SKU) is an innovative system used in inventory management that allows easy tracking of inventory. SKU refers to an identification code always displayed as a barcode on products or services, these barcodes can easily be read and tracks by a machine.

SKU operates by assigning a number to a product so that its price, options and sales details can be monitored. SKUs do not necessarily need to be assigned on physical products, rather, they are placed on intangible products that attract warranties and can be billed to clients.

A Little More on What is a SKU or Stock Keeping Unit

SKUs are vital for inventory tracking and they help business owners account for profits in their businesses whether they trade in goods or services. Products attract SKUs different from services for an effective record keeping. Physical stores, online stores, products discharge outlets, warehouses and many other businesses use SKUs to track their inventory.

SKUs operates electronically by assigning machine-readable identification code usually called barcode on products and services. Usually, SKU is an alphanumeric code, this is, the combination of alphabets and numbers and it is often in eight characters. Once a SKU is read by a machine or computer, it displays the brand of the product, its price, details, color and other relevant information.
The importance of Stock keeping units ranges from its help in reconciling stock levels, identifying profits, identifying reduction of inventory, fill up inventory among other benefits. Business owners make use of SKUs to enable them account for features of products in a category and to also track their inventory.

For instance, if two customers purchase similar products, SKUs would hep analyses the difference of the products and their distinct features.  SKUs help businesses determine which products are mostly demanded and most profitable. This helps businesses realign their order for products to suit popular demand and profit,  thereby helping them increase their revenue.

Stock Keeping Units (SKUs) are quite different from Universal Product Codes (UPCs). SKUs are used internally to help business owners track their inventory while UPCs only track the basic information about a product, that is, it is a type of code found on products so that a product can be identified and differentiated from other products.

Before SKUs can be assigned on products, retailers also need to add the UPCs of the products to their database for an effective inventory record. However, while SKUs vary among businesses, UPCs are identical codes found of the same products regardless of the businesses that sell the items.

The use of SKUs is not limited to a specific industry, type of business or products, it is widely used across many businesses operating in the modern world. This is why you see SKUs being used in a shoe store, brick-and-mortar retail stores, warehouses, physical stores and in many other businesses. Unlike in previous times when a customer needs to rely on the attendant to get all the information needed on a product, the SKU make all information available which are displayed on a computer screen. The use of SKUs in the modern world has brought about ease of shopping for customers and ease of selling to salespersons or attendants.

References for Stock Keeping Unit

Academic Research on SKU Stock keeping unit

•    Brand and stockkeepingunit (SKU) assortments, assortment changes and category sales. Tan, L. P., & Cadeaux, J. (2011). The International Review of Retail, Distribution and Consumer Research, 21(2), 161-185.

•    Investigating effects of out-of-stock on consumer stockkeeping unit choice, Che, H., Chen, X., & Chen, Y. (2012). Journal of Marketing Research, 49(4), 502-513.

•    Psychic stock: An independent variable category of inventory, Larson, P. D., & DeMarais, R. A. (1990). International Journal of Physical Distribution & Logistics Management, 20(7), 28-34.

•    A parsimonious model of stockkeepingunit choice, Ho, T. H., & Chong, J. K. (2003). Journal of Marketing Research, 40(3), 351-365.

•    Brand-level effects of stockkeeping unit reductions, Zhang, J., & Krishna, A. (2007). Brand-level effects of stockkeeping unit reductions. Journal of Marketing Research, 44(4), 545-559.

•    Estimating a stockkeepingunit-level brand choice model that combines household panel data and store data, Chintagunta, P. K., & Dube, J. P. (2005). Journal of Marketing Research, 42(3), 368-379.

•    Recovering stockkeepingunit-level preferences and response sensitivities from market share models estimated on item aggregates, Bell, D. R., Bonfrer, A., & Chintagunta, P. K. (2005). Journal of Marketing Research, 42(2), 169-182.

•    The number of pickers and stockkeeping unit arrangement on a unidirectional picking line, Hagspihl, R., & Visagie, S. E. (2014). South African Journal of Industrial Engineering, 25(3), 169-183.

•    SKU classification: a literature review and conceptual framework, Van Kampen, T. J., Akkerman, R., & Pieter van Donk, D. (2012). International Journal of Operations & Production Management, 32(7), 850-876.

•    Volume per stockkeeping unit for an assortment: A merchandise planning tool, Kunz, G. I., & Rupe, D. (1999). Journal of Fashion Marketing and Management: An International Journal, 3(2), 118-125.

•    Multi-attribute choice model: an application of the generalized nested logit model at the stockkeeping unit level, Takahashi, K. (2011). In Operations Research Proceedings 2010(pp. 617-622). Springer, Berlin, Heidelberg.


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