Distributed Logistics for Digital Commerce Series, Article 3: Master SKU Management

Digital commerce offers brands and online sellers an unprecedented opportunity to offer their products everywhere their customer shop.

Whether it’s on online marketplaces like Amazon, through retailer sites like Target.com, through new formats like Google Shopping, through your own web storefront or through retail outlets, it’s never been easier to reach your customers.

It’s also never been tougher to get it right. And the penalties for getting it wrong are high.

That’s because each of these sales channels has its own rules, communication methods, content requirements, and miscellaneous specifications and requirements.  

Get it wrong and, best case, your listing won’t publish. Get it wrong too often, in a way that might be misleading channel shoppers, or in a way that the channel thinks you might be trying to game their system, and you’ll get thrown off the channel.

Fortunately, there’s a solution. It’s called Master SKU management.

In previous articles, we’ve focused on the idea of making distributed logistics a key part of your online sales strategy. Distributed logistics is the concept of connecting everywhere you sell with all of your sources of inventory, then managing them all as an integrated network.

That means everything – every node on the network like sales channels, suppliers and inventory sources – has to be able to communicate with each other. But they each may be running different operations management systems, communicating in different messaging formats, or using different taxonomies even when talking about the same product.

Master SKU management is the foundational concept that allows all of these channels to work together, and the cornerstone for pulling off distributed logistics across your digital channels.

Master SKU management is the “key” that allows for the translation, mapping, and automation of interactions across all the five touchpoints across all of these channels. When I use the term “key”, I am using that in an almost literal sense: it is the ability to know that what Supplier A calls SKU ‘ABC’, Supplier B may call ‘123’, and my 3PL warehouse may call ‘ XYZ’, but they are all the same item. Knowing what each channel calls my Master SKU allows me to “translate” from one channel to the next.

Here’s how it works.

Despite the complexities of using different communication methods/technologies, having different taxonomies, and each having their own set of eccentricities, we’ve seen that there are five key touchpoints that are needed to communicate with various sales channels.  

These are:

• The listing – or basically the information about the product;
• Inventory availability for the product referenced in the listing;
• The price;
• Order information regarding the purchaser of the product reflected in the listing;
• Shipping confirmation and tracking of the order.

When we are talking product information, we are looking at information pushed out to the sales channels and information about the product received from suppliers. If you are a brand, you often control the information you receive from suppliers. But if you are an online retailer or marketplace reseller, you may have the same product available from multiple distributors or wholesalers and each may have their own SKU, stocking number or other information.

Let’s start thinking about this using the concept of a hub and spoke.

At the hub is all the information needed by any channel – in some format – to supply or sell the product. This includes:

• A unique identifier like a UPC or ASIN;
• The unit of measure. Is the product supplied or sold as a single unit or multi-pack?
• Weight and dimensions for the product. These will drive shipping calculations;
• Primary attributes such as a product name, specifications such as fit, color or size, and descriptive information;
• Secondary information that often varies by the category the product is assigned. Product are often featured in multiple categories – each with different requirements. And sales channels all have their own definitions regarding categories and subcategories. So here’s where things can get interesting;
• Images. Sales channels all have their own demands for image sizes, number allowed and other issues.

So if you think of the Master SKU as the hub, it simply takes all the information from the supplier nodes, maps it to a standardized format applying rules for priority and quality when merging data from many sources into one, and then pushes the information out to the sales channel after remapping it to the format each channel requires (that channel’s “taxonomy”).

Sounds simple, but remember that for on online retailer or reseller, we may be talking hundreds of thousands of SKUs across dozens of channels which change their listing requirements often and sometimes with little notice.

But the advantages are many:

• It’s easy to add new channels or suppliers. Just create a map of their taxonomy to the Master SKU taxonomy, then automate the mapping of individual products;
• It’s easy to make changes. Just make the change to the Master SKU taxonomy and then push the change out the channels. The changes are automatically mapped to whatever format each channel requires;
• It creates a single point of truth for product level analysis and forecasting. All information regarding the product is reflected in data aggregated by the Master SKU – no matter who is supplying the product or what channel it was sold on.

Single Master SKUs also make the second component of the five touchpoints – publishing inventory availability – much easier.

Publishing inventory availability across channels if you are only selling individual units shouldn’t be that challenging. But remember, the objective of Distributed Logistics is to improve yield management. That means increasing inventory turns by using the “same” inventory but presenting it to shopper in different formats.

For example, your product may be:

• Sold in individual units or “eaches”,
• Sold in multi-packs of two or more units,
• Sold as part of a bundle/kit.  For example, a unit of shampoo sold with a unit of conditioner.  

Unlike selling on the retail shelf, online multi-packs and bundles often don’t require being pre-packaged. The multipack or bundle can be created when the order is received by simply shipping the components together or small amounts of inventory can be pre-built to keep just ahead of demand.

This is an important point in leveraging and publishing inventory.

Let’s say I have five units of a product I’m offering as an individual unit, a multi-pack of two units sold on some channels, a multi-pack of three units sold on other channels, and in a single unit sold as part of the bundle I create as I get orders. How much inventory can I publish?

Master SKU management tracks all configurations of the product and reduces them to the lowest common denominator – usually a single unit. So it would tell me I can publish the “same” five units of inventory as:

• Five individual units;
• Two, two packs (I don’t have enough inventory to promise being able to assemble more);
• One, three pack (I don’t have enough inventory to promise being able to assemble more);
• Five bundles (Assuming I have enough inventory of the other products needed to create the bundle. But the system will check that to make sure that I do before publishing the bundle inventory quantity).

Master SKU management is the tool that drives distributed logistics. There are many other advantages to Master SKU management. Check out the accompanying video to this article to learn more.

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This is the third in an eight-part series of videos and articles focusing on distributed logistics and how it can create options for succeeding in the unpredictable world of online selling. If you’d like to learn more, check out the accompanying video series on LinkedIn.  

For an overview of the basic concepts behind digital commerce and digital logistics, check out the first part of the series, Distributed Logistics for Digital Commerce: A Change in Paradigm, and Why It Matters.