Your soap business is booming! Okay, so you have yet to come close to turning a profit. Still, you’re ready to add to your inventory because if we’ve learned anything from Hollywood, we know “If you build it, [they] will come.” You take to your kitchen and mix more scent combinations with your existing portfolio. But how on earth will you track all your new products? To start, you’ll want to create a SKU system.
SKU stands for Stock Keeping Unit and is an internal name for a specific stocked item. If you recall your first-year biology class, this is the business equivalent of a scientific name. The difference between a SKU and a scientific name is the format. Unlike a scientific name, SKUs can be tailored to the needs of the business issuing the name. SKU systems are alphanumeric in structure and follow a logical progression. The logic is based on the specific variations of a single stocked item and how it fits into your existing and future merchandise plans. Here are five (5) steps to create your very own SKU system:
- Identify your variables. If the only variable in your soap inventory is the scent, then your SKU will be very straightforward. However, if you have additional variables like size and color, you’ll want to identify them. If you are only selling soaps, you don’t need to specify “soap” as a variable; however, if you are also selling lotions or plan to in the future, you may want to add a “Type of Goods” variant to your list. Take time to compile your variables; you’ll want to deliberate in your selections.
- Order your variables. Place your variables in order from generic to specific. Each variable you add should narrow the scope of what the SKU refers to. There is no right or wrong order as you get into more specific variants. It will come down to the preference of the business. If you physically organize your soaps by scent, color, and size, consider this order for your variables; this looks like Type of Goods-Scent-Color-Size.
- Identify your variants. Each variable will have a list of variants. If your variable is scent, your variants might be Eucalyptus, Lavender, or Rosemary. Some variables may have a single variant; this may occur when you have growth plans and will add additional variants in the future, referring back to the “Type of Goods” variable.
- Assign an alphanumeric “name” for your variants. Names can be a number, letters, or a combination. You’ll want to create a consistent naming template. If you’re using a whole word for one variant, you’ll want to use a whole word for the rest. If you opt for a four-letter abbreviation for one variant, use a four-letter abbreviation for the rest. Consistency will lead to clean and easy-to-interpret SKUs.
- Assemble your SKUs. For every single stocked item, you’ll want to assemble a SKU. Using your variable order, created in Step 2, and the variant names, created in Step 4, piece together your SKUs. You will want to determine how you will differentiate between the variables; consider a hyphen (-) or a decimal (.). Using numbers exclusively, you may combine all variant names to form one long number to identify your specific stocked item. Find a method that works for you and keep it consistent.
You should now have a consistent SKU system to identify specific stocked items, organize your inventory, and ease the expansion of your product offerings. It is essential to check in on your SKU system periodically to ensure it is still providing your operations ease of reference. As your product offerings expand, consider revisiting your SKU system. Your first attempt may fail, but that is okay; keep applying the steps above until you have a SKU system ideal for your business.
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