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Stock Keeping Unit (SKU)


What is a SKU?

A stock keeping unit (SKU) is a specialized code used for inventory management. A SKU holds details about a particular item, such as manufacturer, color, type, size, material, and so on. Stock keeping units are used in a wide variety of industries, such as in-store and online retail environments, catalogues, and warehouses. It can also be something that eCommerce website owners and managers need to be aware of.

What does a SKU consist of?

SKUs are made up of a combination of numbers and letters. This code itself is further broken down to identify various attributes of a product. Many manufacturers and retailers will create their codes using the Cascade Method, which describes the product from most general quality to most specific as you read the code from start to finish.

For example, a shoe department store looking to categorize a black pair of size 11 Nike Free RNs might create a code like NKEFRNBLK11. Nike is the broadest category, so it’s represented at the start. From there, we add in increasingly detailed information about the model.

It’s important to note that SKUs will vary from store to store, even if they carry identical products. This is because each store can have its own system for creating SKUs. Moreover, a product supplier or manufacturer likely has its own SKU for a product that differs from vendors, which is why it’s not unheard of to find more than SKUs on an item - one from the manufacturer and one from the vendor.


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The purpose of using SKUs

SKUs are helpful in multiple ways, but they’re possibly most helpful in inventory management. Without SKUs in place, managing all of your items in all of their variants would need to be done manually, which would prove to be difficult.

Using SKUs, you can easily recognize what specific variant of an item is selling more than the others within your inventory management system. This will allow you to know what to purchase more of when acquiring more inventory, and when starting your business.

The difference between a SKU and a UPC

A common misconception is that a Universal Product Code (UPC) is a SKU, but it’s not. The UPC code consists of numbers and a barcode that can be scanned to ring up the item. It’s fixed to the product and remains the same no matter where it is sold. A SKU, on the other hand, is shaped by an internal organizational system, so will vary across vendors.


Related Term


Related Term

Business-to-Business (B2B)

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