Stock Keeping Unit (SKU)

Warehouses are full of boxes and boxes of stock. These boxes are full of items that must be tracked using some system or method in order to keep up with them. Besides warehouses, stock must be tracked in retail stores, manufacturing, grocery and supermarkets, and anywhere else that deals in inventory. One of the best ways to keep up with stock is to assign it a Stock Keeping Unit (or SKU). An SKU  is a number or code that is used to identify individual products and services which can be purchased. But exactly what is an SKU and how does it work?

What Is An SKU?

An SKU is a stock number used by businesses and merchants that allows them to track inventory and services from point of distribution to point of sale. SKU is a type of data management system. Each individual item or package is given a code either by the distributor or the business owner. There is an SKU code applied to every product, item, or other forms of goods that can be purchased by a customer.

SKU are not necessarily assigned to just physical products. They also are used to identify services and fees. As some companies provide services, they use SKU’s for billing. As an example, if a computer store repairs a customer’s computer, they use an SKU to determine what services were completed in order to fill out a bill for services rendered. Other samples are deliveries, installation costs, and warranties.

All SKU tracking varies from business to business and according to regions and corporate data systems. SKU also varies from other product tracking systems due to manufacturer regulations or even government regulations. Other examples of tracking methods are Universal Product Code (UPC), European Article Number (EAN), and Global Trade Item Number (GTIN).

How Does SKU Function?


SKU’s are typically printed as a barcode on a label somewhere on the product. This makes it easy and quick to find the products information by scanning it with a barcode reader.

Every item and variant item has its own SKU. This means that slightly different models have different tracking codes which makes it easier to keep up with the items. The first part of a SKU may contain the code for that type of product while the second part of the code may represent the color or style. Not only is the SKU given to an item, the same number is also used on the packaging. So if a box contains 12 widgets that all have the same SKU, then the box will also have the same SKU code.

Retail stores generally track the individual items through their store while warehouses track the boxes. While pretty self-explanatory in a store, this can get tricky when ordering items online or through catalogs. Since the SKU represents the number of units in the item, you should read carefully to make sure you are ordering the desired quantity. In some cases, a quantity of 1 may mean one box full of a dozen separate products. The problem arises when you only need one product, not a dozen.

SKU can also be used to determine how many sales occur at each separate location or where the inventory is stored. SKU can be used to track products through the supply chain as well as to use for inspecting sales data. SKU can tell if certain products sell better than other products.

Some SKU’s come embedded with an RFID tag. Updates or changes can be made to the item by using an RFID reader. High volume stock can be processed quickly this way because you don’t need to manually scan each individual item by hand. RFID system scans are done automatically. Since RFID scanners act similar to GPS trackers, you can use them to find products that might have been misplaced in large warehouses.

Another benefit of using SKU is with seasonal products that need to be updated every year. Some SKU’s contain the year somewhere in the code. If product from the following year is going to be used in a new year, then the year in the code can be changed. This is useful for products that do not change from year to year.

Distributors and merchants need to pay attention to how they assign the codes used for a product’s SKU. This is due to the use of spreadsheets in the system. Codes that start with a zero cannot be quickly imported while codes with a forward slash can get misinterpreted.

When it comes to warehouse storage and distribution, asigning SKU codes to all the items in stock can be a monumental feat. Luckily for distributors, there have been advances in computer software and systems that make the task of giving a product an SKU much easier. This new technology has made the task easier and more conveneient, not to mention more accurate because it is free from human error.