Here’s How to Listen
Your business’ SKUs (Stock Keeping Units) are more than just a collection of product codes—they’re a goldmine of strategic information.
When properly analyzed, SKUs can reveal crucial insights about your inventory and sales trends. They can even signal when it’s time to level up to an ERP (Enterprise Resource Planning) system.
What Are SKUs, and Why Do They Matter?
SKUs are unique alphanumeric codes that businesses use to identify and track products in inventory. They are custom to each business, helping to streamline inventory management and sales analysis.
Unlike UPCs (Universal Product Codes), which are standardized for use across all retailers, SKUs are internally generated and tailored to your company’s specific needs.
Part numbers, on the other hand, are manufacturer-specific identifiers for individual components rather than whole products, distinguishing them from SKUs that cover entire product lines and variations.
Wait, don’t say it: that’s just the clearest, least confusing, least ambiguous terminology possible.
Well, no one consulted us before setting up three different systems for labeling the widgets on your shelves. Confusion was inevitable.
But for now we’re just focusing on SKUs, which are relatively simple. You decide what SKUs to apply to each of your products, and you don’t have to worry about conforming to anyone else’s system. So, the SKUs you use carry important (if sometimes hidden) information about your business in particular.
The Role of SKUs in Business:
- Inventory Management: SKUs are essential for tracking stock levels, reordering items, and organizing your warehouse effectively. They’re the basic “unit” of information used to keep track of all the products you sell. This makes them central to maintaining balanced stock levels and optimizing your supply chain.
- Sales Analysis: SKUs can reveal which products are flying off the shelves and which are gathering dust. Knowing this helps your business refine your product offerings and better match customer demand.
SKU Data as a Diagnostic Tool
Your SKUs aren’t just labels—they’re a window into your business operations. You can look at your SKUs from many different angles to get a better understanding of your inventory in total.
Analyzing SKU Data for Business Insights:
- Patterns in SKU Usage: How often certain SKUs are used can tell you a lot about inventory turnover, product popularity, and potential shortages. For example, high turnover rates for certain SKUs might signal a need for more frequent reordering.
- Product Line Expansion: An increase in the number of SKUs can indicate diversification or expansion. While growth is great, it can lead to complexities that are tough to manage without more advanced tools.
- Inventory Health Check: SKU data can reveal slow-moving items or deadstock, which tie up capital. Identifying these can lead to strategic decisions like bundling products or running promotions to clear out excess inventory.
Strategic SKU Management—The ERP Advantage
Investing in an ERP system can transform how you manage your SKUs—and by extension, your entire inventory and operations.
Enhanced Inventory Control:
- Real-Time Tracking: ERPs provide real-time tracking and management of SKUs, reducing errors and improving efficiency. No more manual updates or reconciling disparate data sources.
- Automated Reordering: With ERP systems, you can set automated triggers for reordering based on SKU data. This ensures you always have optimal stock levels and minimizes the risk of stockouts or overstocking.
Data-Driven Decision Making:
- Forecasting Demand: ERP systems use SKU data to forecast demand, identify trends, and make informed purchasing decisions. This proactive approach can help you stay ahead of market shifts.
- Supply Chain Optimization: SKU data within an ERP can streamline your supply chain, ensuring on-time purchasing and minimizing the disruptions you have to deal with. This helps in reducing lead times and enhancing customer satisfaction.
Improving Operational Efficiency:
- Streamlining Operations: By consolidating SKU management with other business processes, ERPs eliminate redundancies and inefficiencies. This streamlines all your operations, reducing the time and effort spent on manual tasks.
- Cross-Departmental Collaboration: An ERP allows different departments—like sales, inventory, and finance—to access and leverage up-to-date SKU data, leading to better coordination and decision-making across the board.
How to Listen to What Your SKUs Are Telling You
Your SKUs have plenty of stories to tell you about the state of your business.
Analyzing SKU data can provide a strategic roadmap for your business, highlighting when it’s time to consider an ERP solution. If your business is growing, expanding, or simply looking to optimize, the right ERP can take your SKU management and overall operations to the next level. It might be time to dig deep into your SKU data and ask yourself, “Is my business ready for an ERP?
Next Steps: If you’re interested in learning more about how an ERP system can optimize your operations, schedule a 15-minute call to talk about your business with one of our ERP experts.
