What is an SKU code? Its characteristics, basic creation method, and differences from JAN codes and product codes.

As the number of product types increases, the complexity of inventory management also increases proportionally. In particular, for items such as apparel and miscellaneous goods that come in a wide range of sizes and colors, if the management units remain unclear, problems such as ordering errors and excess inventory are more likely to occur.

SKU codes can help solve these issues. SKUs are a convenient management method that allows you to identify products at the individual item level, and are widely used in online shops and mall management. This article provides an easy-to-understand explanation of the basics of SKU codes, how to create them, the differences between them and JAN codes, and points to note when introducing them.

What is a SKU code?

The SKU code "SKU" stands for "Stock Keeping Unit" and is a code that indicates the smallest classification unit in product management and inventory control. It is used to distinguish differences in color, size, design, etc. For example, for T-shirts, a different specific SKU code is assigned to each variation, such as "white, size M" and "black, size L."

Many e-commerce sites and logistics sites register products by SKU, manage inventory, and take stock, making this an essential system for improving the accuracy of sales data and streamlining operations.

Characteristics of SKU codes

SKU codes are unique in that they are assigned individually for each product variation, such as color, size, and design. In the apparel industry, even the same T-shirt from a certain brand has a different SKU for each color (RED, BLK, etc.) and size (S, M, L). Therefore, by using SKU codes, it is possible to understand the sales status and inventory for each product, such as "black L size is out of stock" or "white M size remains unsold."

Another feature of SKU codes is that they can be freely set by each business. There are no restrictions on the numbers, symbols, characters, or composition rules that can be used, so you can design the optimal composition according to your own operational structure and inventory management system.

For example, it can be used to create unique patterns by combining any symbols and numbers, such as manufacturer codes, model numbers, and product categories.

Why is the SKU code required?

In e-commerce and retail businesses, the diversification of products and the expansion of channels have made inventory and sales information management more complex. In particular, for products with many variations in color, size, etc., if they cannot be individually identified, this can lead to operational errors such as incorrect shipments, incorrect shipping, and inventory discrepancies.

The introduction of SKU codes is required as a means to address these issues. SKU codes are effective in a wide range of areas, including improving the efficiency of product and inventory management, reducing operational errors, enabling advanced analysis of sales data, and supporting multi-channel expansion.

In particular, when operating an e-commerce site, where rapid inventory management is required, managing inventory in the smallest units is essential.

Difference between SKU code and other codes (JAN code, product code)

There are various codes for products, such as product identification codes and company codes, but the two that are most likely to be confused with SKU codes are JAN codes (EAN codes) and product codes. The differences are summarized in the table below.

Unlike JAN codes (barcodes) and product numbers, SKU codes are primarily used for internal management. While JAN codes are used throughout the distribution industry as a global standard, SKU codes and product codes can be freely set by each business.

These codes are used depending on the purpose of management and the scope of operation, and SKU is particularly suitable for in-house inventory and sales management.

How to create a SKU code

SKU codes must follow certain rules and structures, and must be designed so that anyone can easily understand their meaning. Here we will explain the basic steps and design points for creating SKU codes.

Step 1. Decide on the management items

The basic way to decide on an SKU code is to first select the items to include. Basic elements include product categories such as T-shirts or shoes, colors such as red or black, and sizes such as S, M, or L.

In addition, by incorporating elements such as product number, product name, season, and release year, it is possible to provide more detailed information to the SKU. For example, in the apparel industry, SKUs are used to distinguish between different materials and seasons and are used for product management.

Step 2. Set symbols and numbers for each item

Next, assign each item a descriptive symbol or number, such as "PN" for pants, "Y" for yellow, or "L" for large size.

Use half-width alphanumeric characters for symbols and be consistent in the use of uppercase and lowercase letters. When managing data in Excel, adding a "0" at the beginning may cause the data to be lost, so it is safer to start with an alphabetic character or a number greater than 1.

Also, if special symbols or Japanese characters are included in the string, they may not be recognized correctly depending on the system, so it is necessary to use only alphanumeric characters.

Step 3. Unify and combine the structure

When designing an SKU code, it is essential to combine symbols and numbers in a certain order. For example, if you use a simple structure such as [Category]-[Model Number]-[Color]-[Size] and apply the same order and rules to all products, including how they are used, the accuracy of management and searches will improve dramatically.

Specifically, using a format like "PN-001-YL" with each element separated by a hyphen or underscore will improve readability. Keeping the number of characters to around 10-15 will make it easier to handle when integrating with inventory management systems and will also make it easier to maintain overall operational efficiency.

Step 4. Create it in Excel etc.

SKU codes are typically created using spreadsheet software such as Excel.

First, organize your product information in a table. For example, enter symbols and numbers for each item, such as category, model number, color, and size, and combine them to generate an SKU code.

When using functions, the most common method is to use the CONCATENATE function or the & operator to combine abbreviations. Also, by using the VLOOKUP function in combination, you can automatically call up product information from master data.

Creating an SKU and creating a product master record will help prevent registration errors and duplications. It will also be useful for centralized management of inventory and orders.

Common issues with SKU code management

Even if SKU codes are introduced, they can cause confusion on-site if the operational system is not in place. To ensure smooth operations, it is important to understand common issues and their likely causes in advance.

Management becomes more complicated due to an increase in SKU codes

As product variations and sales channels increase, the number of SKUs will naturally increase as well, which will make inventory management, logistics operations, and sales data analysis more complicated and increase the burden on the field.

When the number of SKU codes becomes enormous, it becomes difficult to see the whole picture, and searching and changing them takes time, which increases the burden on the field.

Maintaining data integrity and accuracy

When SKU data is spread across multiple systems, such as inventory management systems, order management systems, and sales management systems, it is easy for updates to be overlooked or for inconsistencies to occur. Also, when multiple people are using Excel files or similar, version control becomes difficult, and it is not uncommon for old or incorrect data to remain.

Therefore, it is necessary to establish a system that allows for centralized management of SKU codes.

Duplicate or mistyped SKU codes

Duplicate SKU codes or input errors can lead to incorrect shipments, inventory discrepancies, and returned goods issues. In particular, if there is no consistency in configuration rules or naming conventions, work will become increasingly personalized, making it difficult to know who entered the data and how.

It is important to first clarify the detailed method for setting SKU codes and then implement it as a unified rule within the company.

By properly preparing SKU codes and making them a part of the on-site process, the accuracy of inventory management and work quality will improve significantly. However, in order to go beyond the design stage, it is essential to create a system that enables on-site workers to handle SKU codes accurately.

To establish the use of SKU codes, it is effective to introduce a reporting system and digitize the workflow. In the next section, we will introduce how to use tools that support SKU code management.

We recommend using "i-Reporter" to manage SKU codes.

As the number of SKU codes increases, paper-based or Excel-based management can reach its limits. Electronic forms are an effective way to accurately grasp product information and inventory status for each SKU and respond appropriately to customers.

The on-site report system "i-Reporter" is a convenient tool that can digitize paper reports as they are, helping to improve the efficiency of SKU management.It is characterized by its ability to easily reproduce the design of conventional Excel reports, making it easy to introduce into the field without any discomfort.

Digitalization makes searching and counting more efficient and smooth, and also leads to improved accuracy in SKU management. If you are having trouble with SKU management, why not consider introducing "i-Reporter" along with digitizing your operations?