Why Manufacturers Need a Solid SKU Strategy for E-commerce Success

Your SKU strategy needs to be comprehensive, flexible and customer focused.

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Who would think that a number as simple as a stock keeping unit (SKU) could drive your business processes and impact your customer experience? Also, regardless of whether you reference it as part number, inventory ID, or SKU, you need a way to quickly identify your inventory and locate them in your warehouse, whether you are consuming it for your production or shipping it to a customer.

You might use your SKU numbers on various documents, including your sales orders, purchase orders, and invoices. You might also use them as a search parameter on your websites to expedite searches for specific products or parts. If you have multiple systems such as your e-commerce websites, EDI feeds, ERP, or MES, they could all follow their scheme to identify your inventory uniquely. As you grow, you need a unifying SKU strategy as you add more products (or their variants) to your portfolio. The SKU strategy could also influence the outcome of your e-commerce efforts.

In a recent industry roundtable, experts discussed why SKU strategy needs to be comprehensive, flexible and customer focused. The following are excerpts from the discussion, which you can view in its entirety here.

Comprehensive SKU Strategy

"Sometimes, the e-commerce implementation team is looked at as a disrupter. Oh, we have to make these SKU changes for the website when they really should have done it years ago. SKUs should be assigned so that the logic behind the numbering system will stand the test of time and not be vulnerable to internal or external forces like growth and alterations in the supply chain," said Eric Landmann and Erin Courtenay of Earthling Interactive during a roundtable discussion with Kris Harrington, President and COO of GenAlpha Technologies; and Dave Meyer, President at BizzyWeb; .

"One of the biggest problems comes when a seller adjusts SKUs for the website but hasn't made the commensurate change in the ERP system. The only options left at that point are to completely transform the numbering system on either end so that everything matches or install some middle-manager technology that can translate between the two," said Landmann and Courtenay. Adding such tools to fix the broken SKU strategy is an example of how underlying leaks in your foundation could lead to unnecessary expenses and patchy architecture.

Flexible SKU Strategy

"A great example of how short-term thinking can cause long-term headaches is a parts manufacturer that had a 4-digit SKU system. It was fine when they only made ten products, but their inventory expanded a hundred-fold (with many variations on each product), but their SKU strategy stayed at a 4-digit system. Even more problematic, SKU assignment was sequential, so any time they added a new variation to the product line, the numbering system could not accommodate grouping. For instance, if they had a product with two colors [red knob sku3012; blue knob sku3011] and the next product in the original sequence was (black latch sku3013), what happens when they decide to release an orange knob?" said Landmann and Courtenay.

"Commercial SKU management is a differentiator for manufacturing companies and pays dividends on the marketing and sales side of the business. Things like product description, categorization, specifications, images, weights and dimensions, price, availability, where-used, and cross-reference data are important factors. Manufacturers need to consider these factors when creating their SKU strategy," said Harrington.

Customer-Focused SKU Strategy

"Due to the desire to protect product data, this led to limited commercial considerations or standards during SKU creation and setup. As manufacturing companies move toward digital transformation, the commercial information tied to an SKU is more important than ever before. It's time for manufacturers to lean into sharing product data rather than reacting to it. With that in mind, manufacturers need to do the difficult work to identify all the different elements of an SKU that will lead to customer confidence in making their purchase decision," said Harrington.

You can also improve customer confidence by eliminating confusion caused by spending time on the content that wraps around each SKU. "Think about all the related information and related searches - done by searching for your SKU or product name and then checking "related searches" at the bottom of the search results page. Wherever it makes sense, be sure to add those related keywords into your product pages, meta information, and tags: the more context and connections you can make, the better," said Meyer.

"You need to think about how you will use SKUs on your website, across searches, and within the interconnections in your distribution network. Your customers need to find your products, not only in a direct search but also in the context of the searches they are likely to complete in their purchase journey. Your product posts need to include metadata in title tags, descriptions, links, images, etc. I recommend thinking of those common names, descriptions, and related products you'll be using as you upload those SKUs into your databases and eCommerce tools." said Meyer.

Conclusion

While SKU may seem just a simple number, it has more profound implications for your systems and processes if your SKU strategy is not comprehensive, adaptable, and customer-focused. These implications may not be directly evident to you as they lead to problems such as growing admin expenses, conflict among teams, and increased lead times.

So the next time if you have issues with your customer experience or operational efficiency, review your SKU strategy to eliminate the possibility of it driving your admin expenses. A simple fix such as redefined SKU strategy could be a solution to your current problems.

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