Stock Keeping Unit (SKU)

What is a Stock Keeping Unit (SKU)?

A unique identifier assigned to each distinct product and item in a company's inventory.

A Stock Keeping Unit (SKU) is a unique identifier assigned to a product by a retailer to distinguish it from other products. It is used to manage and track inventory. SKUs can include a combination of letters and numbers, and they often contain information about various attributes of the product, such as:

SKUs are crucial for inventory management, allowing businesses to track the quantity of each product they have in stock, manage reordering, and analyze sales patterns. They help streamline operations, reduce errors in inventory management, and enhance the efficiency of supply chain processes.

How Stock Keeping Units (SKUs) Work?

Stock Keeping Units (SKUs) work by assigning a unique code to each product variant in a company’s inventory. This code serves as an internal identifier that helps businesses organize, track, and manage their stock efficiently.

1. SKU Assignment

When a product is added to the inventory, the retailer or inventory manager creates a unique SKU. This SKU often includes letters and numbers that represent key product details such as category, brand, size, color, and other attributes.

For example, a SKU like "SHO-MEN-BLK-10" could represent a men’s black shoe in size 10.

2. Inventory Tracking

Once assigned, SKUs are used to track inventory levels across warehouses, retail locations, and online stores. Every time a product is sold, returned, or moved, its SKU is scanned or recorded to update inventory counts automatically.

3. Sales and Reordering

SKUs make it easy to analyze sales data and identify which products are selling well or need restocking. Businesses can use this information to manage reordering and optimize inventory levels, reducing the risk of stockouts or overstocking.

4. Product Search and Reporting

SKUs simplify product searches within inventory management systems, making it faster for employees to locate items. They also enable detailed reporting on product performance, profitability, and stock movements.

5. Integration with Systems

SKUs integrate with various systems such as Point of Sale (POS), e-commerce platforms, and warehouse management software, ensuring consistent tracking and efficient order processing.

By using SKUs effectively, businesses can improve inventory accuracy, enhance operational efficiency, and make informed purchasing decisions.