Finschool By 5paisa

FinSchoolBy5paisa

A Stock Keeping Unit (SKU) is a unique alphanumeric code assigned to each product in a retailer’s inventory to streamline identification, tracking, and management. SKUs help differentiate various items based on attributes like brand, size, colour, or model. Unlike barcodes, which are universal, SKUs are specific to a company, allowing efficient stock control, pricing, and sales analysis. By organizing products with SKUs, businesses can optimize inventory levels, reduce overstocking or shortages, and improve customer satisfaction. They are essential for both brick-and-mortar stores and e-commerce platforms, helping track product performance, simplify reordering processes, and support data-driven decision-making for profitability.

Understanding SKUs in the Indian Market

A Stock Keeping Unit (SKU) in India, like elsewhere, is an alphanumeric code that helps businesses keep track of their products. The structure of SKUs is customized by each company to fit their inventory management needs, making it unique to them rather than following a universal standard. In India, SKUs are particularly important in sectors like consumer goods, electronics, apparel, pharmaceuticals, and fast-moving consumer goods (FMCG).

Significance of SKUs in India

  1. Inventory Control: Given the scale and diversity of the Indian market, efficient inventory management is crucial. SKUs help businesses maintain optimal stock levels, preventing overstocking or stockouts.
  2. Efficient Supply Chain: With India’s complex logistics landscape, especially across rural and urban areas, SKUs help ensure accurate tracking of products from warehouses to stores, reducing errors and delays.
  3. E-commerce Growth: India’s e-commerce sector has seen explosive growth, particularly after the pandemic. Companies like Flipkart, Amazon India, and Myntra use SKUs extensively to manage millions of products across various categories.
  4. GST Compliance: Post the implementation of the Goods and Services Tax (GST), many businesses in India revamped their inventory systems to align with compliance requirements. SKUs play a significant role in tracking products for GST reporting and audits.

How Indian Businesses Structure SKUs

In India, businesses often design SKU codes to include attributes that are specific to their product lines. A typical SKU might include details such as:

  • Product Category: Helps identify the type of product (e.g., electronics, apparel, FMCG).
  • Brand: Includes the manufacturer’s or brand’s name.
  • Attributes: Specific features like colour, size, weight, and material.
  • Location Code: For larger businesses with multiple warehouses, SKUs may include location identifiers to track stock across different regions.

Example: Consider a retailer selling sarees with variations in design and fabric:

SR-KANJ-GRN-SILK-5M
Here’s the breakdown:

  • SR: Product category (Saree)
  • KANJ: Type of saree (Kanjivaram)
  • GRN: Colour (Green)
  • SILK: Fabric (Silk)
  • 5M: Length (5 meters)

This structure makes it easier for businesses to quickly search, sort, and identify products in their inventory systems.

Challenges and Best Practices in India

Challenges:

  • Diverse Market: Managing SKUs across a highly diverse market with regional variations in consumer preferences can be complex.
  • Manual Processes: Smaller businesses, particularly in Tier 2 and Tier 3 cities, may still rely on manual systems, which are prone to errors and inefficiencies.

Best Practices:

  1. Automated Systems: Leveraging software like Tally, Zoho Inventory, or SAP can automate SKU management, reducing errors.
  2. Categorization by Demand: Businesses should prioritize SKUs for high-demand products to ensure quick restocking and avoid losing sales opportunities.
  3. Periodic Review: Regularly reviewing and updating SKUs helps prevent redundancy, especially as businesses expand their product lines.

Conclusion

In India’s dynamic market environment, effective SKU management is critical for businesses to remain competitive. Whether it’s a small local shop or a large e-commerce platform, using SKUs enables better inventory control, optimized supply chains, and improved customer satisfaction. As technology adoption continues to rise, SKUs will become even more integral to Indian businesses striving for efficiency and growth in a competitive marketplace.

 

View All