What does SKU mean?

Synonyms: Inventory identifier Inventory number

An SKU, or Stock Keeping Unit, is a unique alphanumeric code that businesses use to track and manage their inventory. These codes help organize products based on attributes like size, color, style, or category, allowing companies to efficiently monitor stock levels, sales, and orders. SKUs are vital in retail, e-commerce, and inventory management because they simplify the process of identifying and locating products.

Unlike standard barcodes or UPCs (Universal Product Codes), which are universal and applied by manufacturers, SKUs are internal codes that businesses create for their specific needs, making them customizable and tailored to the company’s product catalog.

How SKUs Work

SKUs are designed to categorize and identify products uniquely within a business. They are typically a combination of letters and numbers that represent specific product attributes. For example, a shoe retailer might use the SKU SHOE-BLK-8 where:

• SHOE represents the product type (shoe),
• BLK indicates the color (black),
• 8 refers to the size (size 8).

This system allows businesses to easily locate, organize, and track their products through inventory and point-of-sale systems.

Benefits of SKUs

1. Better Inventory Management

SKUs help businesses track their inventory in real time. By assigning a unique SKU to each product variant, companies can know exactly how much stock they have, avoiding stockouts or overstocking issues.

2. Simplifies Order Processing

Using SKUs allows employees to quickly find and manage products during the sales and fulfillment process. They can easily input the SKU into a system to identify a product, saving time and reducing human error.

3. Sales Tracking and Data Analysis

SKUs allow businesses to track the performance of individual products. Retailers can see which items are selling fast, helping them make informed decisions about restocking, promotions, or discontinuing certain products.

4. Improves Customer Service

SKUs provide staff with a fast and reliable way to check inventory levels and product details. This helps improve the overall customer experience by giving accurate information about product availability.

Differences Between SKUs and Other Product Codes

• SKU vs. UPC: While UPCs (Universal Product Codes) are assigned by manufacturers and are the same across retailers, SKUs are unique to each business and are used for internal tracking and identification purposes.
• SKU vs. Serial Number: A serial number is specific to each individual item and is used to track products for warranty or service purposes. An SKU, on the other hand, identifies a group of similar products (e.g., all black shirts, size medium).
• SKU vs. Barcode: Barcodes contain product information and are scanned for tracking, while SKUs are primarily used as internal identification numbers to organize and manage inventory.

Best Practices for Creating SKUs

1. Descriptive but Concise: Create SKUs that are short but descriptive enough to include key product details like type, size, and color.
2. Consistent Format: Ensure all SKUs follow a consistent structure across your product catalog for easier management and scalability.
3. Avoid Starting with Zeros: Some systems may misinterpret SKUs that begin with zeros, so it’s best to avoid this.
4. Scalability: Make sure the SKU format is flexible enough to accommodate new product lines and variants as your business grows.