What is Stock Keeping Unit (SKU)?


Stock Keeping Unit (SKU)

Stock keeping unit (or SKU) is a unique code with letters and numbers, which corresponds to specific characteristics, such as color, size, brand, manufacturer, etc. 

Each business uses unique stock keeping units, which are assigned to different products and services. That’s why similar products offered by different companies will most likely have different SKUs.

Importance of SKU

Stock keeping units are commonly used by retailers, fulfillment centers, and warehouses for the purpose of inventory management. Apart from that SKU has a number of key uses like:

  • Determining the most valuable products for the business
  • Helping determine a reorder point for different goods
  • Tracking inventory to know the availability of certain items
  • Helping customers find a needed product easier

Construction of SKU 

Let’s say, for example, that we need to create a SKU for Nike Dunk Low, size 9, color red. SKU for this item will be something like NIK-DL-RED-09. Now, let’s break down this SKU. NIK refers to the brand, which is Nike, DL is an abbreviation of a style (Dunk Low), red refers to the color of sneakers, and 09 is a size. Still, you can design your own SKU in accordance with your personal preferences, because SKUs are mostly human-readable, which means that one doesn’t require any special knowledge to decipher SKU

Application of SKU

Stock keeping unit consists of detailed information about specific products. That’s why companies can design their own SKUs however they want because SKUs can’t be designed wrong. Still, there are some practices, which can help in making more efficient SKUs:

  • Avoid special characters. SKU is designed not only for employees but also for customers to find products with ease. SKU with special characters or spaces can confuse clients
  • Keep SKUs short. Long SKUs are hard to read and comprehend, that’s why keeping them short is a good practice.
  • Each SKU should remain unique. If SKU is reused customers can misinterpret a new product by thinking it’s another one.

Sometimes, SKUs are misinterpreted with UPC bar codes, also known as universal product codes. It should be noted that Stock keeping units are different from UPC bar codes because while companies create SKU individually for each product, a UPC remains the same.


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