SKU
What is a Stock Keeping Unit (SKU)?
A Stock Keeping Unit or SKU is a number that is assigned to a product for the purpose of inventory management and ease of tracking. In other words, a stock keeping unit is a unique identifier assigned to each product for easier and more efficient record-keeping.
The Importance of SKUs
Stock keeping units are highly important and commonly used by retail stores, warehouses, and product fulfillment centers. Stock keeping units have many key uses, such as the following:
- Identifying a specific product
- Tracking inventory to know how many of a specific product is available
- Helping reconcile stock levels of products
- Identifying shrinkage in inventory
- Determining which products are the most profitable (through analysis)
- Helping identify reorder point for a product
- Helping customers save time by enabling them to find products quickly
How Do SKUs Work?
A stock-keeping unit is comprised of letters and numbers. The numbers and letters provide details about the product, such as the brand, model number, color, etc.
Each company follows its own way of creating SKUs for its products, and there is no incorrect way of making an SKU. With that being said, there are some best practices when constructing an SKU for a product.
- Make each SKU unique. Never reuse an SKU and make sure each product comes with a unique SKU.
- Keep SKUs short. Long SKUs may be difficult to read and may not work in some inventory management systems.
- Do not use spaces or special characters. Creating an SKU with spaces or special characters can confuse people.
- Do not use letters that can be mistaken with numbers. Refrain from using letters such as O and I, which can be mistaken for 0 and 1.
Example of Constructing an SKU
Let’s assume that we are in charge of assigning an SKU for a specific product: a pair of black Gucci jeans that is medium-sized.
We can construct an SKU for the product as follows: BLK-MED-G123-GUC
Where:
- A dash is used to separate specific information about the product
- BLK refers to the color of the product (Black)
- MED refers to the size of the product (Medium)
- G123 refers to the model number given by the manufacturer
- GUC refers to the brand of the product
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