If you’re like me, receiving orders never loses its excitement. But running a warehouse and keeping track of inventory can feel like an endlessly urgent cycle of incoming merchandise, outgoing orders, and returns.
It can feel so overwhelming to keep up with it all that it’s easy to put off making changes.
You guessed it, creating SKUs for inventory management is one change that will lay a good foundation for the future, increase efficiency, and allow your business to grow.
In this article, I’ll give you a full breakdown of everything you need to know about SKUs, including:
- Why they’re important and what they look like
- How they’re different from other tracking systems (like UPC codes)
- And how to get started creating your own SKU system for your eCommerce business.
Let’s dive in!
What does SKU stand for?
SKU stands for Stock Keeping Unit, and is pronounced: “skew.”
What’s the purpose of a SKU number?
The purpose of a SKU is to uniquely identify and track individual products within a company’s inventory system.
This identification number helps businesses manage their inventory more efficiently by enabling them to track the movement of each product from the time it enters the inventory until it is sold.
SKUs can contain alphanumeric characters, barcodes, or a combination of both, depending on the needs of the business.
By using SKUs, businesses can easily monitor their inventory levels, replenish stock in a timely manner, and prevent stockouts or overstocks.
They can also analyze sales data to identify which products are performing well and which ones need improvement, and make informed decisions on pricing, marketing, and promotions.
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What’s the difference between a stock keeping unit (SKU) and a universal product code (UPC)?
This is an example of a UPC:
When looking at the difference between SKU vs UPC, remember:
- A SKU code is assigned by you, the seller, and is used only to track inventory internally. Universal Product Codes (UPC), which are assigned externally by a nonprofit, are used for external tracking by retailers and distributors at the POS system (point of sale).
- Creating SKUs does not have a standardized practice. But, the practice of creating UPCs is standardized.
- The same product from a different seller will likely have a different SKU. UPC codes will have the same code regardless of the seller.
- SKU codes can be alpha-numeric. UPCs are only numeric.
- SKU codes may be interpreted by humans, while UPC codes cannot.
What does a SKU look like?
Let’s say that you’re a retail store selling Steve Madden black Terraa women’s shoes in size 6. Here’s a SKU number example for that product:
“Sm,” the abbreviation for the manufacturer, Steve Madden, is followed by, “terraa,” which is the name of the shoe. “Bk,” describes the color of the shoe, black. Finally, “6” is the size of the shoe.
Here’s another SKU number example for an Alloy Art 1” rear axle kit for a 2010 Harley Davidson that’s a little more complex:
“Aa,” the abbreviation for the manufacturer, Alloy Art, is followed by, “rak,” which is an abbreviation for the type of part that it is – a rear axle kit. “1,” describes the size of the part. “2010,” is the year. “Hd,” stands for Harley Davidson, which is the make of the motorcycle that the part is intended for.
Why a SKU system is important to your business
1) They are an industry standard
Stock-keeping units are industry standard throughout the supply chain (and all eCommerce, really). Operating as a seller without SKUs is like having a business without a website – you just can’t compete without it.
You may be getting by without using SKUs right now, but you really need them to function in any kind of multi-channel selling. For example, Amazon will not allow you to list a product without a SKU.
2) They convey information quickly
SKU codes are chiefly used for communication by describing products in a way that helps everyone quickly get on the same page.
They are a form of shorthand, that if done well can communicate exactly what the product is at a glance.
3) They speed up warehouse processes and help you efficiently track inventory levels
SKU codes speed up the process of finding products because they allow you and your employees to search, track, and reference products and inventory levels in your warehouse (or basement).
There are many procedures that take place in a warehouse in the life of a product and SKUs can be used in each of these steps to shave seconds or even minutes off of the time a task takes to complete.
If you multiply those seconds saved by the hundreds of times a week or day each of those tasks gets completed, you’re looking at hours of time saved. And I don’t think I need to remind you that time is money.
4) They increase accuracy in warehouse procedures
Using SKU codes offers businesses the benefit of achieving significantly more accurate inventory management.
This is made possible by the ability to track inventory electronically in various ways. Barcode scanning, for instance, is known to be 99.99% accurate, which is much higher than relying solely on warehouse workers for manual inventory counts.
5) They improve quality control
With everyone in your warehouse or retail business reading SKU codes, you decrease the number of problems that occur because of miscommunication, which is the main source of human error.
Concise communication through the use of SKUs is just one more way to prevent things like mispicks and misships, and to make sure that orders go out correctly every time.
Creating SKUs and SKU management best practices
I hope I’ve convinced you that SKUs are essential parts of any successful inventory management system.
Now, let’s get down to the nitty-gritty of how to actually generate SKU numbers for your business.
Create a format
The first thing to do when creating SKUs is to create a standard format for all of your SKUs to follow.
Decide what numbers and identifiers will be included in your SKUs, and in what order.
Will you include the brand name? The color? The manufacturer’s part number? Think about what attributes your products typically have that distinguish them from other products to figure out what needs to be included.
Here’s an example of a SKU format:
manufacturer/brand identifier, part number or name, category identifier, product name-color identifier-size identifier
So, for a red Stacy Adam’s Men’s Gordon Shoe in size 9.5, the SKU might be, “samsgordon-rd-9.5”.
Take advantage of the alphanumeric SKU number system to make your SKU numbers as descriptive as possible.
If you can determine your SKU format now, you can save time in the future when you’re naming more SKUs because you’ll already know what to include. You’ll also know exactly how to read a SKU because the same attributes will be in the same place every time.
Create a coding system
You’ll want to create and maintain a list of codes for things like manufacturers, brands, colors, and sizes.
You can do this on a spreadsheet by making a list of the manufacturers and brands that you carry in one column, and then assigning a code to each of them.
That might look like:
The same goes for colors and sizes. You can add the variations to a spreadsheet and decide how you’ll abbreviate each of them.
For sizes, it might look like:
And for colors:
The benefit of creating a set of standard identifier codes to use when naming your SKUs is that you and your employees will begin to memorize them, and eventually be able to read and interpret SKUs quickly.
Remember, you don’t need to have a great long-form descriptive title for each item because you’ll be able to look at a SKU and know exactly the type of product that it’s representing.
So, save that long-form descriptive click-bait title for display on your marketplace(s) and your website(s)!
SKU naming best practices
There are no rules when it comes to SKU naming, but here are a few do’s and don’ts that you might want to consider to make things easier on yourself and your employees:
- Keep it short
- Use identifier codes like ‘s’ for small and ‘rd’ for red
- Uses dashes as separators
- Use sequences of numbers and letters
- Make them too long
- Include special characters like asterisks and ampersands. Some programs may not recognize those characters, so your SKU may not show up correctly or at all.
- Spell out every single word e.g. stacy-adams-mens-shoe-gordon-red-9.5
If you’d prefer not to name your SKU numbers manually, a SKU generator might be the way to go. eCommerce platforms sometimes have SKU generators for their clients.
We also offer SKU generation at SkuVault for our clients. With so many options to name SKUs, there’s no excuse not to do it!
Take charge of your inventory today by taking these steps:
- Schedule a time to create your formatting, develop your codes, and name your SKUs.
- Create your formatting, codes, and name your SKUs.
- Implement a system to continue labeling, tracking, and naming new SKUs in your warehouse. Be consistent.
Creating SKUs will open the door to so many possibilities when it comes to tracking your inventory and growing your business by creating SKUs.
It may seem like a daunting task. But your business is worth the effort!
FAQs about SKUs and SKU systems
How is a SKU different from a barcode?
A SKU is an internal code used by retailers to manage their inventory, whereas a barcode is a machine-readable representation of data (usually a product’s UPC or EAN) used for scanning at the point of sale.
Barcodes are standardized and recognized globally, while SKUs are unique to each business.
How do I create a SKU?
When creating a SKU, follow these general guidelines:
- Keep it short, but informative: Include relevant product attributes, such as brand, size, and color.
- Use a consistent format: Establish a standard structure for your SKUs to make them easily recognizable and manageable.
- Avoid ambiguous characters: Refrain from using characters like O and 0 or I and 1, which can be easily confused.
- Make it human-readable: Ensure your SKU is easy to read, understand, and communicate verbally.
How do I implement a SKU system?
To implement a SKU system, follow these steps:
- Analyze your inventory: Identify the various product attributes that need to be included in your SKUs.
- Establish a SKU format: Determine the structure of your SKUs, ensuring consistency and readability.
- Assign SKUs to existing products: Create unique SKUs for each product in your inventory.
- Integrate SKUs into your business processes: Update your inventory management, sales, order fulfillment, and customer support systems to incorporate SKUs.
- Train your team: Educate your employees on the new SKU system and its benefits to ensure smooth adoption.
Do I need both a SKU number and a UPC code?
Yes, it is recommended to have both a SKU number and a UPC (Universal Product Code) for optimal inventory tracking.
A SKU number is specific to your business and helps you manage your inventory, while a UPC code is a standardized, globally recognized barcode used for product identification at the point of sale.
UPC codes are often required by retailers and eCommerce platforms to list products, and they facilitate scanning and tracking throughout the supply chain.
What are some SKU number examples?
SKU numbers vary based on the retailer’s chosen format, but here are a few examples:
- Example 1: ABC-12345-S-BL (Brand: ABC, Product ID: 12345, Size: Small, Color: Blue)
- Example 2: 01-200-GR-M (Department: 01, Item number: 200, Color: Green, Size: Medium)
- Example 3: NIK-RN4-10W (Brand: Nike, Model: RN4, Size: 10, Gender: Women)
The structure and information included in the SKU depend on the retailer’s preferences and the product’s specific attributes.
Is a SKU number the same as an item number?
A SKU number and an item number may refer to the same thing in some contexts, as both are unique identifiers for a product in a retailer’s inventory.
However, an item number may be a more generic term, while a SKU number typically includes specific product attributes such as brand, size, and color.
The use of these terms may vary between businesses, but the primary goal is the same: to track and manage inventory efficiently.
Why does Facebook Marketplace and Amazon need my product’s SKU number?
Facebook Marketplace, Amazon, and other eCommerce platforms require your product’s SKU number for several reasons:
- Inventory management: The SKU number helps the platform and seller manage inventory levels, track sales, and monitor product performance.
- Order fulfillment: It ensures that the correct product is picked, packed, and shipped to the customer, reducing errors and improving customer satisfaction.
- Product identification: The SKU number helps uniquely identify each product, reducing confusion and simplifying the listing process.
- Reporting and analytics: SKU numbers allow for the aggregation and analysis of sales data, enabling sellers to make informed decisions and optimize their product offerings.
Having a SKU number for your products simplifies the overall selling process and enhances the efficiency of the marketplace.
Is a SKU the same as a barcode?
No, a SKU (Stock Keeping Unit) is not the same as a barcode. A SKU is an alphanumeric code that is unique to each product in a retailer’s inventory and is used for internal inventory management purposes. SKUs are created by the retailer and can vary between businesses.
A barcode, on the other hand, is a machine-readable representation of data (usually a product’s UPC or EAN) that is standardized and globally recognized.
Barcodes are used for product identification at the point of sale and for tracking products throughout the supply chain. While SKUs are unique to each retailer, barcodes follow a standardized format that is recognized across different retailers and organizations.
Can SKUs be contained inside barcodes?
Yes, SKUs can be contained inside barcodes, but it requires a custom barcode system specifically designed for your business.
This can be achieved by encoding your SKU information directly into the barcode, which can then be read by barcode scanners or other data-collection devices.
In this case, the barcode would represent the unique SKU information you have assigned to your products, allowing you to manage your inventory more efficiently.
However, it is important to note that this custom barcode system would only work within your organization and may not be recognized by external systems or retailers that rely on standard barcode formats such as UPC or EAN.
In conclusion, SKUs play a crucial role in inventory management, as they enable businesses to efficiently track, manage, and analyze their products.
By using a unique identifier, retailers can optimize their inventory control, order fulfillment, reporting, and customer support processes.
Barcodes, on the other hand, provide a standardized method for product identification and tracking throughout the supply chain.
Looking for a solution for both barcode management and inventory management as a whole?
By providing an integrated platform that simplifies and streamlines inventory and barcode management, SkuVault helps businesses stay organized, efficient, and informed.
With a comprehensive set of features designed to optimize the entire inventory management process, SkuVault is the ideal partner for any retailer looking to improve their inventory control.
We encourage you to explore SkuVault’s features page to learn more about how this powerful software can revolutionize your inventory management.
Ready to see SkuVault in action? Book a live demo of the software, and witness firsthand how SkuVault can transform your business operations for the better.
SKU Best Practices
Choose alphanumeric formats: SKUs made up of letters only can be misread as part of the product description. Numeric SKUs can be confused with other numeric codes such as UPC or EAN. Alphanumeric SKUs stand out and thus, can be easily identified as the SKU.
- Make your SKUs easy to understand. ...
- Arrange words according to importance. ...
- Don't use letters that look like numbers, spaces, accents or symbols.
- Step 1: Start with a top-level identifier. ...
- Step 2: Assign unique identifier in the middle numbers. ...
- Step 3: Complete the SKU with a sequential number. ...
- Step 4: Input the SKUs to your POS or inventory management system. ...
- Step 5: Create SKU barcodes.
- Standardize your SKUs with a simple framework. ...
- Set SKU-specific reorder points. ...
- Group SKUs by similarities. ...
- Avoid confusing letters, numbers, and spaces. ...
- Calculate your SKU ratio. ...
- Compare SKU ratio to sales ratio. ...
- Simplify and remove unpopular SKUs when possible.
- You can reuse SKUs.
- The first 2-3 digits should represent the highest category.
- Avoid beginning the SKU with the number 0.
- Do begin your SKU with letters.
- Avoid using letters that look like numbers.
- Don't use any of the manufacturer numbers within your SKUs.
- Don't overload your SKUs with meaning.
SKU Best Practices
Choose alphanumeric formats: SKUs made up of letters only can be misread as part of the product description. Numeric SKUs can be confused with other numeric codes such as UPC or EAN. Alphanumeric SKUs stand out and thus, can be easily identified as the SKU.
A SKU code should stay between 8 and 12 characters, and it's better to start the code with a letter. It's also best to avoid confusing characters, such as zero (0). You should also use only uppercase letters in your SKUs so that the lowercase letter “l” and uppercase “I” won't lead to misunderstandings.What is a SKU example? ›
A Stock Keeping Unit (SKU) is a unique identifier for a product, typically assigned by a retailer or manufacturer. It is used to track inventory and is typically associated with a product's barcode. An example of a SKU is XYZ12345. This would be the unique identifier for a specific product, such as a T-shirt.How do you create good inventory item numbers? ›
Keep item numbers short, but not so short that they could be mistaken for other numbers (i.e., quantities). 4 to 8 characters will suffice for most organizations. Do not load item numbers with meaning; do not try to use the item number to describe your product.What are the different types of SKU? ›
There are 6 different types of SKUs: standard, component, assembly, bundle, collection and virtual. Assemblies, bundles, and collections are made up of several different standard SKUs and components.
The stock keeping unit (SKU) is an alphanumeric code assigned to inventory that allows retailers to track their stock, measure sales by product and category, design store layouts and flow, and enhance shopping experiences. These codes are designed by retailers based on criteria they deem important.What is SKU optimization? ›
SKU rationalization is the process of determining which products should be kept, retired, or improved based on the myriad of factors that contribute to performance. Sometimes referred to as SKU optimization, this process enables organizations to refine their product portfolios to improve their financial outlook.How many SKUs should you start with? ›
However, if you're just establishing your new brand, my strong advice is to start with up to 6 SKUs, making plans for additional items in the pipeline. This can help you build your strategy for at lest the first year. During this year, you learn what your clientele is looking for, and offer them appropriate products.Can I create my own SKU number? ›
Depending on the type of inventory, your SKU number can include identifying information for everything—from department to style, gender, size, and color. You can create SKU numbers manually or automate the process with an inventory management or point-of-sale (POS) system.How do you create a product code? ›
- Product codes must not start with 0! ...
- Keep it short and sweet, but not too short! ...
- Try not to use your supplier's product code as your product code. ...
- We recommend using uppercase letters, numbers and dashes (-) only in your product code.
Typically, SKU numbers are listed on the product's packaging — usually above the product's barcode, as seen below. While the 12-digit numeric code on the bottom is the product's UPC (Universal Product Code), the alphanumeric code at the top is the SKU number (which is different from the UPC).What are SKU standards for? ›
What Is a Stock Keeping Unit (SKU)? A stock-keeping unit (SKU) is a scannable bar code, most often seen printed on product labels in a retail store. The label allows vendors to automatically track the movement of inventory.What is the difference between SKU and item number? ›
Manufacturer part numbers are a static Identifier of a product which is universal to all distributors, wholesalers, resellers. SKU's are for in house identifying as well as used for Inventory and for sales. Each business has it's own unique Sku they assign a product, thus developing their own catalog of items.Do my products need a SKU? ›
Every product (including product varieties) should have its own unique SKU, so that the seller can easily distinguish products from each other. This makes inventory management and inventory tracking much more efficient. Every company will have its own system of rules for creating and managing SKUs.What are the 4 ways to put a value on inventory? ›
The four main inventory valuation methods are FIFO or First-In, First-Out; LIFO or Last-In, First-Out; Specific Identification; and Weighted Average Cost.
- Use ERP software designed for inventory management. ...
- Automate your inventory management system. ...
- Leverage real-time data & analytics to optimize inventory management. ...
- Use demand planning tools to forecast accurately.
- Choose inventory management software. If you're wondering how to take inventory, make the process easier on yourself by using inventory management software. ...
- Identify all locations for inventory. ...
- Identify each unique item. ...
- Categorize items. ...
- Describe items. ...
- Create barcodes or QR codes.
Unlike a number of other important codes in product management, SKUs are generated by each company or vendor and unique to that business. With every product release, a new SKU is required by the seller.Can SKU be same for multiple products? ›
You can't have two products (or options) with the same sku.What are the two methods of SKU classification? ›
Various approaches and techniques exist to classify SKUs. A well-known approach is the ABC analysis, which usually classifies product groups based on either demand value or demand volume. Another well-known approach is the FNS technique, which distinguishes product classes based on demand rate (Fast, Normal, and Slow).What is SKU architecture? ›
Your SKU architecture showcases both your most popular products and your least popular ones. Your SKUs can also help you get inventive with your best-selling products in addition to helping you determine your reorder points and which products to eliminate.What is SKU segmentation? ›
What is SKU Segmentation? When you have a list of SKU numbers for every product in your shop, you may end up with hundreds or thousands of numbers, depending on how big your business is. The goal of SKU segmentation is to allow you to search by brand and have all the SKU numbers for that brand come up.What is SKU complexity? ›
Complexity rating profiles the internal and external complexity of a SKU. Internal complexity factors include recipe, process, batch size, equipment utilization, filling, packing, inventory and logistics. This information comes from supply chain, R&D and operations groups.What is the 80 20 rule for SKUs? ›
The 80/20 principle says that 20% of your SKUs will account for 80% of your sales. My guess is that this is true for your business.It is also possible that 10% or less of your SKUs account for 80% or more of your sales.What are the disadvantages of SKUs? ›
- Lack of demand planning. Increasing the number of SKUs is a decision requiring a study on potential customers and on the market situation.
- High probability of error. ...
- Rise in costs. ...
- Tied-up capital.
SKU profitability reporting allows you to compare how a product is performing compared to other products in your portfolio. Using this data will reveal potential problems in your approach, giving you the flexibility to make changes before your profits start to dip too low.How much does SKU cost? ›
From $14.99 per month.What are the 7 steps to create a new product? ›
Although the product development process differs by industry, it can essentially be broken down into seven stages: ideation, research, planning, prototyping, sourcing, costing, and commercialization.How do I create my first product? ›
- Research your idea. Do a thorough business analysis: ...
- Make or build and test your prototype. Get a working prototype of your new product. ...
- Write a marketing strategy and plan. ...
- Launching your product. ...
- Keep reviewing your product. ...
- Protect your idea.
Does the product owner write code? The Product Owner and/or Scrum Master *can* be members of the Development Team, but neither of them *have* to be. Therefore the PO *may* write code to assist in the development of his or her product.What is the difference between SKU and barcode? ›
While stock keeping units or SKUs and barcodes are similar, they are not the same. A barcode is different from a SKU by the way it is assigned to a product—SKU numbers are unique to a business or seller, and barcodes should be assigned to all like products regardless of where they are sold.What is a Best Buy SKU number? ›
SKU number is a store stocking unit number each store gives for the item model/color/size, etc. All exact same items have the same store SKU number. Serial number is unique to the individual item. Serial number is different for every unit manufactured and given to the unit by the manufacturer, not the store.What are the best practices for Amazon SKUs? ›
- Use the same SKU to refer to a product in all your stores across your channels and your QuickBooks account.
- Never use the same SKU for more than one product or variant of a product.
- Don't stray from your SKU format.
A SKU is a unique code consisting of letters and numbers that identify characteristics about each product, such as manufacturer, brand, style, color, and size.What are the three most common inventory control models? ›
Three of the most popular inventory control models are Economic Order Quantity (EOQ), Inventory Production Quantity, and ABC Analysis. Each inventory model has a different approach to help you know how much inventory you should have in stock.
A good product listing page provides information on the items, addresses potential questions, and shows how these items will improve their lives. This is also the perfect opportunity for you to leverage your main keyword or keyword phrase in order to rank for it.What is an example of SKU in Amazon? ›
If you are selling the same products on two different Amazon stores, Amazon will assign different SKUs to those products. So, on one store the SKU for a small blue t-shirt could be ST-21-GRO-5, and the same product on another store could be XY-52-ZTW-06.How do I create a merchant SKU on Amazon? ›
- Have the first two letters represent your supplier or manufacturer.
- The next two letters should represent your product type. ...
- Enter a date, preferably when you sent your products to Amazon's warehouse. ...
- You can add the condition of your product. ...
- Enter your purchase price.
Example SKU formats
The digits, separated by hyphens, refer to brand, style, and size. For example, she uses the SKU 4225-776-3234 for pants that are brand 4225, leg style 776 (boot cut), and size 32x34 (waist and length).
It involves measuring the profitability of the products in your inventory using metrics such as inventory holding costs, procurement fees, fulfillment costs, customer acquisition costs, and historical sales data.