Primarily, SKU codes are used for inventory management and sales, as we mentioned above, however, there are other uses of SKU codes.
1. Clarify small differences between products
In the example that we gave in the previous entry, What is SKU?, the company could originally be selling only one size of hazelnut cream. Then, as he got older, he realizes that he needs to sell several different sizes. A few years later, fads come and go and people demand more variety of flavors, so now they are selling variations of the original in flavor and size.
Without SKUs, this would become confusing at all levels of the supply chain: retailers need help ordering the right stock based on demand, and the manufacturer needs to buy the ingredients needed to produce that stock to keep up with the demand. the demand. We've gone from just one SKU, to potentially dozens.
2. Incentivize customers to buy more
Because SKUs are logical and digital, they become quite useful in automation. If a customer buys a particular product, it is possible to recommend similar products based on the SKU codes. Maybe a similar video game, another style of shirt in the same color and size, another drink with a similar flavor, etc.
3. Faster customer service
Customers don't like to wait for the salesperson to look in the store to see if they have a certain product. But with well-managed inventory using SKU codes, with powerful and up-to-date software, the seller only needs to access a computer or mobile device, scan a code, and instantly check stock levels for that product; that is, finding the same shoe in a different size without having to go through the boxes in the back of the store.
4. Increase profitability
One of the great benefits of using SKU codes is that they can help you get a more profitable business. This process is known as "SKU rationalization."
What is SKU rationalization?
SKU rationalization is the process of determining the profitability of a product by using SKU codes against inventory and sales data to develop detailed profitability reports. By having an accurate view of the full life and value of individual products, companies can make data-driven decisions about whether to discontinue production of a product or refocus marketing efforts.
This process is also called "inventory optimization" or "product optimization."
SKU rationalization can help in:
- Eliminate unprofitable SKUs.
- Reduce inventory loss by detecting high waste SKUs.
- Improve inventory forecast accuracy.
- Optimize relationships with suppliers based on the value of sales.
- Optimize team size based on new inventory needs.
- What is SKU?
- Is SKU the same as UPC?
- What are SKU codes used for?
- SKU Examples
Soon we will expand the information with:
- How is a SKU generated?
- SKU in inventory management software
- Other useful SKU metrics