IHL Group research shows that global retailers lose more than $1.73 trillion a year because of overstocks and out-of-stocks. The RFID lab’s report says that average inventory accuracy is often between 60% and 70%, which causes phantom stock and mistakes in planning. When consumers encounter an out-of-stock item, they switch to a competitor. This results in a loss of revenue.
Inventory carrying cost is estimated to be anywhere from 20% to 30% of the total product value in inventory. Supply chain leaders continue to face both supply chain visibility on inventory and resilience-related challenges, making it more difficult for them to grow at a rapid pace.
The NineHertz develops “Smart SKU” systems to improve visibility, increase accuracy in planning, and enhance the performance of existing operational processes. In addition, we allow you to take advantage of existing operational processes, creating an overall seamless workflow.
This blog will discuss the significant issues, the key benefits of implementing an SKU tracking system, and the effect it can have on an organization.
What Is Analytics Software for SKU-Level Performance Tracking?
SKU-level performance tracking software is used by retailers to identify and track an individual product variant within their inventory through the use of a unique Stock Keeping Unit (SKU) code. This allows for obtaining detailed information regarding that item’s inventory history based on different attributes, such as size, color, model number, batch number, and location. Businesses no longer need to count every item right away—they check the quantity of each product type and note the exact storage location.
The platform links each SKU to barcodes, RFID tags, and inventory software. Those tools record every stock movement the moment it happens. An automatic update is triggered whenever goods arrive, shift location, are sold, or are returned.
SKU-level tracking raises accuracy, shortens audit time, and shows which products perform well. Clear demand data lets firms decide when to reorder and how much to order, but also what price to set.
Why SKU-Level Performance Tracking Matters for Data-Driven Businesses
When operations expand faster than the systems that support them, even orderly warehouses lose count. More product lines, more sales channels, and faster stock rotation widen tiny gaps until large discrepancies appear.
Lack of Regular Audits
Counting your stock once a year, small mistakes can go unnoticed for months. Without regular cycle counts, small mistakes in recording, picking, or storing items add up to bigger differences between the physical inventory and the system data, which makes stock levels less and less reliable.
Inaccurate Receiving and Shipping Processes
Some of the major reasons for stock discrepancies are wrong labeling of goods, suppliers giving only a part of the order, and returns not being recorded immediately. When incoming and outgoing products are not checked properly, system records differ from actual quantities. This can make it harder to make good decisions about whether to refill and how accurate orders are.
System Breakdowns and Bad Integration
Point of sale, ERP, and warehouse systems that work separately create silos and don’t keep track of inventory in real time. Because of this, a company’s stock availability records may show different amounts or locations, which can lead to overselling, late orders, and misunderstandings. Separate departments get mixed up when they use more than one system that doesn’t work with the data they need. They also rely on separate sets of inventory data.
Inadequate Warehouse Layout
Improperly organized warehouse layouts can lead to misplaced or incorrectly picked items. If all products are not stored in designated locations, warehouse teams spend considerable time searching for products, which decreases the accuracy of the overall inventory count.
Poor Demand Forecasting
Incomplete or inaccurate sales data while creating future sales forecasts may lead to stocking slow-moving items in excess or not stocking items in high demand properly. If businesses cannot forecast customer demand properly, they constantly have an imbalance of inventory. This creates an inconsistency between records of inventory and the amount of inventory, which leads to an instability of business operations as a whole.
Key Features to Look for in SKU-Level Analytics Software
Here are the key features required for efficient analytics software SKU-level performance tracking–
- Real-Time Stock Tracking- It is highly important that analytics software tracks sku-level performance in real time by facilitating live stock tracking. It should be capable of updating the stock level, backordered inventory, and incoming logistics.
- True Unit Economics- This feature allows the analytics software to calculate the profit per unit by factoring in the cost of goods sold, listing fees, storage fees, transaction fees, fulfillment costs, and landed costs.
- Sales and Performance Tracking- the particular feature helps to track how fast a particular product is sold to identify the top-performing items. At the same time, it also brings the multi-channel availability that consolidates data from the various sources to provide a unified informative dashboard.
- Actionable Insights- The SKU-Level performance tracking software must be able to provide actionable insights by classifying the products by their sales volume and demand variability. It helps to curate strategies for sales according to demand.
- Easy Integration- The software must be easily integrable to the existing warehouse management systems, enterprise resource planning software, and eCommerce platforms.
How AI Can Help Improve SKU-Level Performance Tracking Accuracy
The increase in stock management accuracy created by tracking inventory at the SKU level provides companies with insights regarding revenue, expenses, and margins. This helps businesses understand how their products relate to respective sales and demand signals to act much quicker to boost profitability.
Optimized Stock Levels
With SKU-level analytics, it is very clear to see which products are in constant demand and slow-moving. This helps companies to avoid investing in surplus inventory and still keep the best-selling items in stock. Striking the right balance between supply and demand enhances the efficiency of working capital and avoids loss of revenue due to missed sales opportunities.
Improved Forecasting
Businesses can use past SKU-level sales data to plan inventory expenditure accurately. Instead of predicting demand at a general product level, companies can make forecasts based on the performance of specific variants. Accurate forecasting reduces last-minute procurement costs and emergency restocking and supports predictable financial planning.
Reduced Carrying Costs
The examination of SKU-level performance gives a clear picture of which products are occupying the warehouse space and generating very little revenue. Cutting down on such items results in a reduction of the cost of storage space, insurance, and handling. A tighter inventory structure lowers the financial strain and enhances the total cost-to-revenue ratio.
Also Have a Look – Detention Costs in Supply Chains and How AI Reduces Them
Better Resource Allocation
SKU-level data enables management teams to focus on products that yield higher margins and consistent turnover. Warehouse space, procurement budgets, and operational efforts can be directed toward items that generate measurable returns.
Benefits of Using Analytics Software for SKU-Level Performance Tracking
Real-Time Visibility
Teams can precisely count the SKU stock in every storage location when they can access SKU information in real time. This makes it possible to accurately compare the actual amount of SKU stock on hand with the amount that is recorded in a system. By giving precise inventory counts, teams avoid uncertainty, save things from getting lost, and let teams make decisions about how to run their business more quickly.
Faster Inventory Counts
SKUs allow staff to count inventory items by scanning them rather than typing them in. As a result, teams can check for item availability faster and with fewer errors, so that cycle counts can be performed more easily. Regular, accurate cycle counts help verify records against actual stock.
Reduced Discrepancies
Inventory tracking at the SKU level allows companies to detect variances in inventory as products move through the supply chain. If inventory does not match the amount of product available at the store location, teams can immediately find out where that discrepancy occurred. The increase in visibility helps companies decrease their shrinkage exposure and gives them a better handle on their inventory levels and how it is stored.
Multichannel Synchronization
Inventory systems that use SKU-level tracking monitor inventory data as it moves through physical and virtual locations. When an item is sold from one sales channel, the retailer’s stock is automatically updated across all sales channels. This automated process prevents overselling, which increases the accuracy of fulfilling orders and ensures customers can see the same items available for sale across each of the company’s sales channels. Cross-Channel Visibility provides a unified view of SKU performance across both physical stores and online platforms.
How AI Can Help Businesses Make Faster SKU-Level Decisions
Artificial intelligence helps businesses to make faster SKU-level decisions in numerous ways-
- 1.Granular Demand Forecasting & Real-Time Sensing
The old-fashioned models are generally inefficient in predicting the demand for particular inventory across different locations. Thus, AI powered solutoins helps to better analyze historical sales, weather patterns, and social media trends to predict the demand accurately. - 2. Automated Inventory and Replenishment
AI-powered analytics software SKU-level performance tracking helps to track the inventory levels in real time. Thus, it automatically sends the transfer or reorder actions when the inventory level falls below the defined limit. At the same time, it also enables dynamic safety stock to better adjust the buffer stock according to live market conditions. - 3. Rapid SKU Rationalization and Assortment Planning
AI-enabled analytics software tracks sku-level performance by identifying the underperforming inventory and slow-moving items. It then suggests removing or reducing such items that block the space in the warehouse and finances. It also analyzes the customer preferences to tailor the product assortment according to local market demands. - 4. Dynamic Pricing and Promotions
When a business implements artificial intelligence by partnering with the right supply chain software development company, it can leverage the dynamic pricing strategy to align its prices with competitors and market conditions. Thus, it helps to better attract the customers without compromising the margins and profit. Advanced tools use machine learning to optimize pricing and automate inventory replenishment at the individual SKU level.
Industries That Benefit Most from SKU-Level Analytics Software
Analytics software SKU-level performance tracking is highly crucial for businesses that manage diverse inventory and complex product volumes.
Here are the industries that benefit the most from SKU-level analytics software-
Retail & eCommerce
Analytics software tracks SKU-level performance in the retail industry by optimizing shelf placements, managing multi-channel inventory, and personalizing online recommendations. Integrating data analytics in retail enables retailers to analyze vast datasets efficiently, including sales transactions and customer engagement data. Mapping SKU-level data to shopper purchase behavior allows retailers to trace how every product interacts with customer actions across online, mobile, and in-store channels.
Manufacturing
Businesses in manufacturing industries are highly dependent on such solutions as they help in production yield optimization, managing complex Bill of Materials, and more. The demand forecasting for a particular product variant assists in avoiding excess stock or outstocking. Analytics software can reduce stockouts by up to 60% and optimize inventory turnover.
FMCG and CPG
Companies in the FMCG and CPG industry use the analytics software to analyze the “basket trends” and consumer behavior across the distribution networks. The extracted data is then used to stock inventory and serve customers during the varying market demand.
Pharmaceuticals and Healthcare
Hospitals and medical centers use SKU-level data for the precise tracking of batch numbers and expiration dates. At the same time, it also helps to ensure traceability, compliance, and regulatory safety.
Fashion and Apparel
Brands in the fashion and apparel industry have been using the SKU-level analytics software to manage their inventory for a particular variant, such as size, style, and color. It helps companies to adapt to changing fashion trends in real time. Retailers using advanced analytics see a 15–20% improvement in sales per SKU within the first year of implementation.
Challenges Businesses Face Without SKU-Level Analytics
Growing Product Complexity Across Channels
With the growth of product range and expansion of businesses into multiple sales channels, the operation of stock without a product-level SKU system structure becomes impossible. Today, businesses have many product versions existing in a variety of settings (warehousing, internet, retail), which leads to issues with missing data and inconsistencies between physical inventory locations. This can result in discrepancies in stock levels, delayed orders, and a lack of proper management procedures.
Impact on Revenue Stability and Customer Experience
Having a proper inventory is more than just a way to keep your operations running smoothly. Without having accurate stock levels of items to the exact count, teams cannot make informed decisions on product purchases, replenishing products, and fulfilling orders as expected. This causes surplus stock in some locations and shortages in others, disrupting cash flow and operational efficiency.
Building a Structured Operational Foundation
SKU tracking serves as a well-organized base to handle the complexities of the operation. It standardizes the identification, storage, movement, and analysis across the supply chain. This helps prevent companies from losing control and lessens reliance on manual work as businesses scale.
Preparing for Scale and Market Changes
Without tracking the SKU level, the risk of operating in a fast-paced and multi-channel environment can be higher. A structured system supports growth, keeps accurate counts, and responds to changes in demand. The capabilities developed in implementing a structured system become part of core operations.
Steps to Implement SKU-Level Tracking
SKU-level tracking can be implemented in four steps, beginning with system design and moving to consistent monitoring.
1. Design a Standardized SKU Naming Convention
An organized way to name SKUs is the basis for keeping track of inventories accurately. Make sure that each variation has a unique SKU code and that the alphanumeric naming structure is the same for all of them. For example, type, size, color, or brand should be in a logical order. When creating the structure, think about any possible future expansions to the product and avoid employing characters that could be unclear.
2. Update Inventory Records
The first thing you need to do is set up an inventory structure based on your SKUs. Most small businesses start with spreadsheets, but the easiest method to keep track of inventory and update records is with automated inventory management and point-of-sale systems. This lets you see real-time stock levels across all sales channels and cuts down on mistakes by retaining precise counts through automation in many places and sales channels.
3. Integrate with Physical Tracking Hardware
For continuous stock visibility, software systems should be supported by physical tracking tools. All SKUs should have a barcode or QR code, and the product or location should be labeled on it. By providing each team with scanners, each time an item is received into your warehouse center, stored, picked, and shipped, accurate inventory counts can be maintained, and your records can be kept up to date.
4. Train Your Team
For the new method to work, teams need to be consistent. To operate the system well, employees need to know exactly how the SKU structure and scanning work. Giving staff basic training and guidance helps them use the new system correctly and makes fewer mistakes.
5. Monitor, Analyze, and Refine
After implementation, keep reevaluating regularly. By measuring product-wise sales, know customers better, identify items that are fast and slow movers, and decide when to reorder based on supply and demand. Carry out checks to uncover fewer discrepancies and fine-tune the method over time. Continuous analysis helps make better decisions for business, improve accuracy, and keep stock levels at the right level.
Metrics to Track Using SKU-Level Analytics Software
Generally, key metrics tracked by performance metrics include Sales Volume, Sell-through Rate, and Turnover Rate.
| Metrics | Definition |
|---|---|
| Revenue per SKU | Keeping track of revenue generated by each SKU to identify the top performers and slow-moving products. |
| Gross Margins | Profit is generated by each product while calculating the cost of goods, advertising, and fees. Profitability Analysis measures metrics like Gross Margin Return on Investment (GMROI) for each SKU to determine the most profitable items. |
| Sales Volumes | It refers to the number of units sold per store or channel. |
| Inventory Turnover | Timeline of how quickly a stock is sold and restocked |
| Storage Cost per SKU | Warehouse expenses are divided by the total number of SKUs |
| Return Rate by SKU | Identifying unpopular items or defective pieces |
| Customer ratings | Average reviews given by the customers on a particular product reflect their satisfaction |
Role of Custom Software in SKU-Level Tracking
Standard tools get overwhelmed by the complexity and scalability needs. Custom software gives specialized systems that give more accurate visibility, better integration, and more control of large, widely spread inventories.
Tailored Tracking and Data Structures
With custom software, companies get the freedom to set up SKU structures that fit perfectly with their operations. They can come up with alphanumeric codes that carry vendor information, product type, size, color, or the warehouse location, which makes each product variant uniquely identifiable.
Platforms such as Shopify Analytics and WooCommerce Analytics provide integrated real-time dashboards for tracking SKU sales and managing inventory.
Automation and Real-Time Visibility
Custom solutions integrate with barcode scanners and RFID devices to automate operations like stock tracking during the processes of receiving, storing, picking, and shipping. Inventory records are updated with every stock movement transaction in real time, significantly reducing manual entry errors. Inventory visibility in real time across warehouses, stores, and online platforms facilitates precise stock availability and supports automatic ordering of items when stock levels reach the predefined reorder trigger points. SKU-level insights enable businesses to identify high-performing products, optimize pricing data & strategies, and tailor marketing efforts to specific customer segments.
High-Level Integration and Scalability
Custom-developed software connects seamlessly with ERP, CRM, POS, and accounting platforms, forming a single data ecosystem. The consequent elimination of information silos ensures that the inventory records stay consistent across different departments. If the business decides to grow, the system can be scaled up to accommodate more SKUs, new product lines, and additional warehouse locations without affecting business operations or necessitating a major overhaul.
Advanced Analytics and Reporting
Custom software solutions offer comprehensive analytics that are in line with the corporate objectives. Businesses can assess various key performance indicators, such as inventory turnover, product performance, and profitability, not only at the product group level but also down to the SKU level. Historical sales data helps in making a more precise forecast demand and planning purchases accordingly. Besides, it facilitates SKU rationalization, which helps identify slow-moving or low-margin items that can be reduced or eliminated.
Enhanced Security and Control
Custom software enhances data security with cutting-edge technologies and employs advanced security features to prevent unauthorized users from accessing data based on their role. This increases accountability among employees, reduces the chance of errors by employees themselves, and helps protect critical financial and operational data from unauthorized access.
Future Trends in SKU-Level Performance Analytics
The future trends for analytics software SKU-level performance tracking are highly focused on transforming the process from reactive reporting to autonomous decision-making. Here are some of the trends that we might witness in the near future-
1. Self-Correcting Supply Chains
Analytics software tracks SKU-level performance using different metrics and data sources. However, artificial intelligence can shift from suggesting actions to actually taking them without human intervention. It might soon automatically adjust the order quantities without relying on a human counterpart.
2. Real-Time Data Integration
The software, which currently relies on the weekly or monthly reports are expected to be replaced by one that can fetch and act on the live information. Real-time data plays a pivotal role in supply chain inventory management, allowing businesses to respond quickly to changes in demand and supply chain disruptions.
3. Attribute-Based Forecasting
While the modern solutions treat the product as an SKU, the new system will be analyzing the key attributes like color, size, and material to understand the performance drivers of specific product variations. It will enable better and more clear decision making.
4. Carbon Footprint Impact
The new analytics software SKU-level performance tracking is expected to incorporate sustainability metrics to help minimize waste. It can do the same by establishing better control over the production and suggesting more ethical ways to discard the unsold products.
How The NineHertz Helps Businesses Build Smart Inventory Systems
The NineHertz works with companies to create and deploy intelligent inventory systems designed to effectively and efficiently track and manage multiple high-volume SKUs across large warehouse locations. The entire process begins with a thorough analysis of how the organization currently conducts its inventory processes, identifying existing systems of record, data deficits, and integrations required to support the new inventory application.
Once the inventory processes are identified, creating a streamlined UI/UX allows the teams to swiftly, accurately, and effectively manage and move their inventory. The system utilizes cloud technology to enable real-time visibility of inventory throughout the warehouses and sales channels while keeping data secure and accessible.
By integrating with existing ERP, POS, and eCommerce systems, The NineHertz ensures that every movement of inventory, sale, or adjustment to inventory is visible immediately throughout the organization.
This means businesses can get precise control over their current inventory while reducing their chances of making errors when managing inventory. They can also have a solid, scalable way to manage more SKUs, operate at multiple sites simultaneously, and meet increasing order demand.
Conclusion
By using this system to track SKUs, firms have tighter control of their inventory, reduced errors, and increased accuracy of decision-making. Improving transparency reduces stockouts and excess inventory, which ultimately enhances cash flow.
As the business grows and sellers use more channels, the ability to manage inventory manually will become impossible. Embracing well-structured and technologically advanced tracking is a significant step towards digital transformation. Companies that smartly upgrade their inventory systems become more resilient, grow at a faster pace, and take data-driven decisions confidently for sustainable growth.
Frequently Asked Questions
1. Is SKU the Same as a Serial Number?
No, an SKU is different from a serial number. An SKU is a code used internally that consists of letters and numbers to uniquely identify and keep track of product variants, such as size or color. On the other hand, serial numbers are unique identifiers given to every single unit to track warranty and ownership. Several items of the same kind share one SKU, but they have different serial numbers.
2. How Do You Set Up SKUs?
One of the first things you need to do to set up SKUs is to choose a clear alphanumeric system that includes the most important product information, including brand, type, size, and color. Don’t use special characters, and keep codes to 8 or 12 characters if possible. Make sure that each version of a product has its unique SKU so that the inventory can be properly sorted, found, and kept track of.
3. How Do You Track Inventory with SKUs?
Inventory is tracked with SKUs through inventory software that is integrated with POS systems and barcode scanners. The system updates stock levels automatically whenever an item is received, moved, or sold. Besides, the company uses sales data at the SKU level, conducts regular inventory checks, and establishes reorder points to keep inventory at an appropriate level and in good order.
