The Ultimate SKU Tracking Guide

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Stock Keeping Units or SKU is a method that can be used to organize inventory. The method takes into consideration key similarities and differences in various products. The information is then used to come up with a simple way of keeping track of stock.

It is worth pointing out that if you offer a huge variety of products it may be quite difficult to keep track of all stock through physical inventory. Stock Keeping Units or ‘SKU’ help simplify tracking and ensure your business runs smoothly.

You can create unique SKU numbers for the purpose of tracking. Some people do this manually while others choose to use a point of sales system to generate the necessary numbers.

There is also certain software that enables you to generate SKUs automatically. Once you have the alphanumeric codes for your products, you can enter the information into a given system for easy tracking.

Why Is SKU Tracking Important

To appreciate why you need to incorporate SKU tracking into your business management system, it is important to have a look at why it is necessary. First, SKU tracking is a good way for you to get insights into certain aspects of your business.

For instance, SKU tracking can help you understand the margin of profits or losses you may be incurring. This information can be helpful in future planning and helps you come up with sound strategies to mitigate losses and maximize profits.

Second, SKU tracking also lets you know aspects of sales trends and possible future demand. With such information at your disposal, you are able to make plans that ensure you are not overstocking or understocking at any given time. At the end of the day, you will be able to have control over the flow of stock in and out.

In other words, you will know exactly which SKU to reorder at a given time and by how much. You are also able to determine the SKUs that are moving slowly and should therefore be avoided or reordered in a much smaller quantity.

SKU Tracking Methods

There are different ways for you to keep track of inventory. The best method depends on the resources available to you and the amount of stock you have at any given time.

Manual Tracking

As a new startup, you may not have all the technological hardware and software you require to keep track of your stock. In this case, you can opt for the manual method of tracking your inventory.

A pen and paper or booklet may be all you need to track the way products move from the supplier to your store and out. This technique can be quite tedious and time-consuming because you have to make updates to your booklet regularly.

Spreadsheets

If you have a computer you can utilize the spreadsheet system to keep track of your inventory. Spreadsheets are an excellent way to organize massive amounts of data. 

Using your SKU numbers or codes, you can enter data into your system and easily keep track of inventory. The downside to this system is that you may still have to enter data manually by typing the necessary information into your computer system.

Inventory Management Systems

Inventory management systems like Shipfusion’s keep track of inventory and stock. They can also forecast demand and generate reports that can be useful in the daily running of your business. In most cases, these systems also integrate customer support and training. They can be used alongside payment and accounting systems to give a wholesome view of stock movement.

Open-Source Software

Open source software is one of the most modern ways for you to keep track of inventory and stock. These platforms often have simple interfaces, basic dashboards and some tracking features. Basically, they have what you need to keep track of your stock but may not have advanced features that can help you connect with other important systems.

Software-As-A-Service

A SaaS solution with inventory features is another excellent way for you to keep track of stock. This solution is often recommended for startups that are not yet ready to invest in comprehensive enterprise inventory management systems.

Cloud-Based Software 

Cloud-based software solutions are quite easy to use and allow different people to keep track of stock remotely. This is a good solution for any business that has multiple outlets and wants to keep track of inventory or stock from every location.

Teams in different locations can enter data into the cloud-based system and share the information with everyone else regardless of location. Not only are cloud-based software solutions flexible but they also help cut down on costs.

Third-Party Logistics (3PLs)

You can opt to outsource your inventory and stock-keeping management to a third-party service provider. This can help free up space, time and resources in your organization.

This solution is often recommended for retailers and ecommerce businesses that are 100% online.

Third-party companies often have the mandate to receive, store, move and track inventory on behalf of their customers. This strategy eliminates the need for the primary business to have a warehouse thereby eliminating the costs associated with it.

In-House Solution

Another way to keep track of stock is by coming up with personalized applications. This is especially a good option for organizations that have enough internal resources to plan, design, develop and deploy their on-premises inventory management systems.

One of the most important advantages of this method is that you can come up with a system that is tailored to match your unique business needs. In-house tech support is also able to make changes and improvements as soon as the need arises.

Benefits Of SKU Tracking

Understanding some of the key benefits of SKU tracking can be all it takes for you to appreciate why you need to implement it for your own ecommerce or retail business.

1. Cost-Efficiency

Because SKU tracking gives you an accurate overview of how your business is doing, you are better equipped to deal with rising costs. You can easily plan for new stock without the danger of incurring extra costs due to urgent orders. It is equally important to note that you are able to use limited space better and this eliminates the costs you would have incurred in case of overstock.

2. Customer Satisfaction

The last thing you want is to have customers queuing outside your warehouse or point of delivery only to realize that the products they need are out of stock. Proper SKU tracking allows you to know exactly what products are needed at any given time.

That makes it possible for you to make provisions for them beforehand. At the end of the day, your customers will receive the products they need at the exact time. This will increase customer satisfaction and ensure you win their loyalty.

3. Space Management

With accurate SKU tracking data, you can easily predict stock demand at any given time. That means you are able to tell when a particular type of product is in season and when another is out of season. This information allows you to determine what types of products to restock at any given time.

The result is that you will be in a much better place when it comes to organizing stock within your warehouse or storage space. It is equally important to realize that some products require special handling and storage.

SKU tracking ensures that you are able to juggle between different types of stocks without running the risk of damaging products due to poor storage or handling.

4. Can Prevent Deadstock

As a retailer or ecommerce trader, you may have a huge variety of products just to ensure that your customers get what they need. However, a certain variety of products end up becoming slow when it comes to selling. There are even certain types of products that may not sell for a long time and risk going bad or becoming obsolete.

These are what is commonly referred to as dead stock. SKU tracking lets you get a deeper understanding of how each type of product is moving through the supply chain.

The information you get by tracking each type of product lets you know what is likely to become dead stock and that gives you enough time to come up with a strategy to sell off the product before it becomes dead stock.

5. Understocking And Overstocking

Having too many pink nail polish bottles and only a handful of red ones can be a recipe for disaster when it comes to selling. SKU tracking lets you know exactly how many pink polishes are available against the red ones..

That ensures that you can quickly restock red bottles without running the risk of ordering more pink polish. A good SKU tracking system ensures that your stocks are running optimally which means you do not overstock nor do you understock any product.

Challenges Of SKU Tracking

SKU tracking can become quite challenging as your stock grows larger. This means you are going to have to spend more time entering data into spreadsheets or any other computer program you may be using.

It can also be quite tedious to keep track of stock in different locations. Human error coupled with slow reporting can end up causing a lot of confusion. It is equally important to note that the more stock you have, the higher the chances of needing more manpower. That can end up becoming a costly affair.

How To Improve Your SKU Tracking

Here are some of the things you need to keep in mind in order to ensure a more efficient SKU tracking system.

Design A Standardized Method Of Tracking

One of the most important things for you to do is to develop a standardized method of tracking your stock. A consistent and easy-to-understand coding system is key to avoiding any errors. A simple and consistent system also makes it easy for other members of your team or third-party entities to understand exactly what each code means.

Avoid Confusing Characters 

Creating a coding system with confusing codes can end up working against your tracking needs. For instance, starting your coding system with the letter O can cause some problems especially if you consider that it almost matches with the number 0.

Consider Similarities

Ensure you sort out products according to similarities and differences. For instance, having the same type of shirt in different colors can present a challenge unless you have a color-coding system integrated into your overall tracking technology. Things such as size, color, ingredients and quantity are among some of the issues that should inform your coding method.

Ditch The Spreadsheets

While spreadsheets can be a good way for you to keep track of a few items in stock, it should not be a long-term SKU tracking system. Spreadsheets can become a little too difficult to manage especially as the business grows and stock increases. The same applies to manual stock tracking using pen and paper.

Consider Going Digital 

The most effective way for you to keep track of stock is by utilizing a digital SKU tracking system. There are a variety of software or state-of-the-art tools that can integrate into your supply chain technology stack and warehouse management system to give the most effective results.

Embracing the latest technologies is key to eliminating human error, getting accurate reports, saving time and avoiding unnecessary expenses that may cost your business a lot of money.

Consider Working With Shipfusion

Shipfusion offers fulfillment services and excellent tools for building a successful ecommerce operation.

Shipfusion operates some of the best warehouses and provides expert inventory management to ensure your business runs as smoothly as possible. Shipfusion offers real-time technology solutions that make tasks such as SKU tracking simple and convenient to achieve its objectives.

It is worth pointing out that Shipfusion is able to handle every stage of fulfillment. This includes processing of orders, shipping and customer returns. Real-time updates regarding each of the steps ensuring that you are able to keep track of every item in your supply chain are always available to the client.

Working with Shipfusion is one of the best ways for you to free up your time, save on costs and ensure your customers enjoy satisfaction every time they use your services. Learn more.