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What is an SKU (Stock Keeping Unit)?

Updated: Jan 30

What is an SKU (Stock Keeping Unit)?

Understanding SKUs (Stock Keeping Units) involves recognizing their purpose, components, and importance in inventory management.

Here's a breakdown of key aspects related to SKUs:

Purpose: SKUs serve as unique identifiers for products within a company's inventory. They facilitate efficient tracking, management, and organization of products, enabling businesses to streamline their operations and improve customer service.

Components: SKUs typically consist of a combination of letters, numbers, or both. The specific components of an SKU can vary depending on the company's needs, but they often include:

  • Product Identifier: This part identifies the product itself. It may include the product's name, model, or a code that distinguishes it from other items in the inventory.

  • Attributes: SKUs can include additional information such as size, color, style, material, or any other relevant product attribute. These attributes help differentiate variations of the same product.

  • Vendor Information: In some cases, SKUs may incorporate information related to the manufacturer or supplier of the product.

  • Location Codes: For businesses with multiple storage or distribution centers, SKUs may include codes that indicate the product's physical location within the company's facilities.

Uniqueness: Each SKU should be unique within a company's inventory. This ensures that no two products are assigned the same SKU, preventing confusion and errors.

Inventory Management: SKUs are a crucial component of inventory management systems. They enable businesses to keep track of stock levels, monitor sales, reorder products when necessary, and quickly locate items within the warehouse.

Sales and Analytics: SKUs are valuable for analyzing sales data. Businesses can use SKUs to determine which products are performing well, which need restocking, and which may require adjustments in pricing or marketing strategies.

Retail Operations: In retail, SKUs play a crucial role in pricing, stock replenishment, and the checkout process. Cashiers can scan SKUs to retrieve product information and ring up sales accurately.

E-commerce: In online retail, SKUs are used to manage product listings, update inventory availability on websites, and ensure the correct product is shipped to customers.

Supply Chain: SKUs also play a role in supply chain management, helping companies track products as they move through various stages of production, distribution, and delivery.

Barcodes and QR Codes: Many businesses encode SKUs in barcodes or QR codes to facilitate quick and accurate scanning and data retrieval.

In summary, SKUs are essential for effective inventory management, enabling businesses to track and control their product offerings efficiently. By assigning unique codes to each product and its variants, companies can streamline their operations, minimize errors, and enhance customer satisfaction.

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