Guide to high SKU counts and choosing the right fulfillment provider

A retail brand with a high SKU count likely caters to diverse customer preferences and demographics, ensuring a product range suitable for various tastes and needs, or multiple colors and sizes. A wide array of SKUs enables brands to capture a larger market share by offering extensive choices, potentially attracting more customers and driving sales growth. It also helps businesses stay competitive in the market by keeping up with evolving trends and consumer demands as well as providing opportunities for cross-selling and upselling complementary products. Perhaps more importantly, a robust SKU assortment allows for better inventory management and flexibility in responding to market fluctuations and seasonal demands.

What are stock keeping units (SKUs)?

Stock keeping units (SKUs) are a component of inventory management. They are the units of measure in which the stocks of products are managed. A unique code is assigned to each distinct product or item in a store's inventory. It serves as a way to track and manage individual products, distinguishing them from one another based on attributes like size, color, style or manufacturer. SKUs help retailers efficiently manage inventory, track sales and replenish stock as needed.

How do you create a SKU?

Creating a SKU involves assigning a unique code or identifier to each distinct product or variant within a product line. Here's an example of how to create a SKU:

Let's say you're a clothing retailer and you have a t-shirt available in different sizes (S, M, L, XL) and colors (black, white, blue). To create SKUs for these variants, you could use a combination of letters and numbers to represent the size and color. For instance:

• Small black t-shirt: SKU = TS-S-BLK
• Medium white t-shirt: SKU = TS-M-WHT
• Large blue t-shirt: SKU = TS-L-BLU
• Extra large black t-shirt: SKU = TS-XL-BLK

In this example, "TS" could stand for "T-shirt," followed by the size abbreviation (S, M, L, XL), and the color abbreviation (BLK for black, WHT for white, BLU for blue). This creates a unique identifier for each specific variant of the product.

Why are high SKU counts more complex?

High SKU counts can be more complex due to the sheer volume of products to manage, which can lead inventory management and storage optimization challenges. With a larger number of SKUs, retailers must allocate more resources to accurately track stock levels, leading to potential errors and discrepancies. Higher SKU counts often require more intricate logistics and fulfillment processes to ensure timely order fulfillment and minimize stockouts or overstock. Retailers with high SKU counts may also face challenges in merchandising and product placement, whether physically or digitally, as they must effectively showcase a wide range of products while still maintaining a cohesive and appealing store layout. Moreover, managing a large assortment of SKUs requires a robust data management system to track sales, analyze trends and make informed decisions about product assortment and inventory replenishment.

Retailers that often have high SKU counts include:

• Stores with multiple product categories: Department stores typically have high SKU counts as they offer a wide range of products across multiple categories, from clothing, shoes and accessories to home goods and electronics.
• Specialty retailers: Stores specializing in specific niches like electronics, sports equipment, apparel, footwear or beauty products often have extensive SKU counts to cater to diverse customer preferences within their niche.
• Online marketplaces: Platforms like Amazon, Walmart or Target, with online marketplaces, host a vast array of products from various sellers, leading to a high SKU count to accommodate the diverse offerings available to customers.
• Home improvement stores: Retailers selling building materials, tools, hardware and home improvement products typically have a wide selection of SKUs to meet the varied needs of DIY enthusiasts and professionals.

How a high SKU count affects inventory management

A high SKU count can create several inventory management challenges. These include increased complexity tracking stock levels, forecasting demand accurately and managing warehouse layout and storage space efficiently. With a larger number of SKUs, there's a higher risk of stockouts or overstock situations if not managed properly, leading to potential revenue loss or increased holding costs.

A diverse assortment of products may also require specialized handling or storage conditions, further complicating inventory management processes. With high SKU counts, having the right fulfillment provider is crucial to handle the associated complexities effectively. For example, a 3PL can offer advanced inventory management systems, scalable storage solutions and expertise in handling diverse product assortments, ensuring optimal inventory levels, accurate order fulfillment and optimized warehouse operations. By partnering with the right fulfillment provider, retailers can streamline their inventory management processes and meet the demands of a high SKU count without compromising on customer satisfaction or operational efficiency.

SKU management best practices

Brands benefit from strategically managing SKUs. It enhances inventory accuracy, reduces operational complexity and improves overall efficiency. When you effectively manage SKUs it enables better decision-making and more streamlined processes. SKU management best practices to follow include:

• Standardization: Maintaining consistent naming conventions and formatting SKUs to ensure clarity and ease of organization.
• Regular audits: Conducting periodic audits to review SKU performance, identify slow-moving or obsolete items and make necessary adjustments to optimize inventory.
• Classification: Categorizing SKUs based on factors such as demand, profitability and seasonality to prioritize resources and focus efforts effectively.
• Forecasting: Utilizing historical data and market trends to forecast demand accurately, driving proactive inventory management and minimizing stockouts or overstock situations.
• Inventory tracking: Implementing robust inventory tracking systems to monitor SKU movements in real-time, allowing for timely replenishment and efficient order fulfillment.
• SKU rationalization: Continuously evaluating SKU performance and considering consolidating or discontinuing low-performing items to streamline operations and reduce complexity.
• Reorder points: Utilize sales data to determine the optimal time to reorder inventory for each SKU, preventing both excess inventory and stock-outs. Tailor reorder points to reflect the varying turnover rates of different SKUs; for example, if certain sizes or products sell faster, adjust replenishment schedules accordingly.
• SKU proliferation: While it's tempting to introduce more SKUs based on consumer preferences, uncontrolled proliferation can lead to increased capital tied up in inventory, complex picking strategies, and higher order error rates. Analyze sales data to assess whether SKU expansion is truly driving revenue growth or if it's being offset by increased storage costs and sales cannibalization.
• Technology adoption: Leveraging inventory management software and automation tools to streamline SKU management processes, enhance visibility and improve overall efficiency.
• Scalability: Planning for scalability by implementing scalable SKU management practices that can accommodate business growth and evolving market dynamics effectively.

Using fulfillment providers with experience can help you with SKU management and utilizing best practices.

Choosing the right fulfillment provider for high SKU volumes

Fulfillment operations are critical to handling high SKU counts effectively. When choosing a fulfillment partner, you should look for the right level of experience and expertise. An omnichannel fulfillment partner should also be able to offer:

• Scalability: Evaluate the fulfillment provider's capacity to manage high volumes of SKUs without compromising efficiency or quality of service.
• Technology: Assess the provider's inventory management systems and software capabilities to ensure they can effectively track, manage and optimize inventory across a diverse range of SKUs.
• Order accuracy: Prioritize accuracy in picking and packing orders, as errors can result in customer dissatisfaction and increased operational costs.
• Warehousing solutions: Look for fulfillment providers offering storage options tailored to accommodate the specific needs of a diverse product range, including temperature-controlled facilities or specialized storage for fragile items.
• Shipping options: Consider the provider's flexibility in offering various shipping methods and carriers to meet the unique requirements of different SKUs and customer preferences.
• Cost considerations: Compare pricing structures and fees associated with managing high SKU counts, ensuring transparency and alignment with your budget and projected sales volumes.

Cart.com for high SKU fulfillment

Cart.com has the expertise, technology and facilities to handle high SKU requirements. With 14 locations, omnichannel fulfillment and advanced demand forecasting and inventory management capabilities, we have solutions for a variety of fulfillment needs. Talk to our team today to learn more about how we handle high SKU counts, specialized storage, seasonal needs and more.