Stock Keeping Units (SKUs): The Building Blocks of Inventory Management

SKU – Stock Keeping Units, commonly known as SKUs, are an essential part of inventory management for any business that sells physical products.

These unique codes are used to identify and track individual items in a company’s inventory, and are crucial for maintaining accurate stock levels, determining reorder points, and analyzing sales data.

But what exactly is a SKU and how does it work? In this article, we will explore the basics of SKUs and how they can be used to improve your business’s inventory management.

Why AreĀ  SKUs So Important?

A SKU is a unique code that is assigned to each individual product in a company’s inventory. It’s like a fingerprint for your products – no two products will have the same SKU.

This code is used to identify and track each product, and is crucial for maintaining accurate stock levels, determining reorder points, and analyzing sales data.

Think about it, without SKUs, it would be nearly impossible to keep track of all the different products you have in stock.

Imagine trying to manually keep track of every single product by its name or description, it would be a nightmare!

But with SKUs, you can easily scan them at the point of sale and know exactly which product is being sold and how many you have left in stock.

1. Time Management

SKUs also play a crucial role in determining when it’s time to reorder a product. By keeping track of sales data, you can see when a product is running low and need to be reordered before it sells out. This can help prevent stockouts and lost sales.

2. Data Analization and Decision

SKUs can also help you analyze sales data to see which products are selling well and which ones aren’t. This information can help you make informed decisions about which products to keep in stock and which ones to discontinue.

Key Features

1. Unique identification: Each product in a company’s inventory is assigned a unique SKU code, allowing for easy identification and tracking of individual items.

2. Accurate stock management: By keeping track of SKUs, businesses can maintain accurate stock levels and avoid stockouts.

3. Reorder point determination: By analyzing sales data, SKUs can help determine when it’s time to reorder a product before it sells out.

4. Sales analysis: SKUs can be used to analyze sales data and determine which products are selling well and which ones are not.

5. Streamline operations: With the help of SKUs, businesses can streamline their inventory management operations, making it more efficient and effective.

6. Customizable: SKUs can be designed to be flexible, customizing them to specific industry or even specific business needs.

7. Barcode/QR code: Most of the SKUs are barcode or QR code which makes it easy for scanning and tracking the product.

8. Cost effective: Implementing a SKU system can be cost-effective and can save time and money in the long run.

Stock Keeping Units vs. Universal Product Codes

Are you aware that different companies can have different Stock Keeping Units (SKUs) for the same product?

That’s because SKUs are created internally by companies to track their inventory, so the code assigned to an item can vary from business to business. But why is this important?

Stock Keeping Units (SKU)

Well, it actually gives retailers an advantage when it comes to advertising. Let’s say a company decides to advertise a discounted refrigerator with a certain SKU.

Shoppers won’t be able to easily find the same refrigerator at other sellers just by searching for that SKU. This means that competitors won’t be able to match advertised prices and steal customers away.

Universal Product Codes

On the other hand, universal product codes (UPCs) are the same no matter which business is selling the item.

So if a customer sees a discounted item with a UPC code, they can easily find that same item at other retailers.

Different SKUs for the same product can help prevent competitors from poaching customers and allow retailers to design specific advertising campaigns.

How to Construct A SKU

A stock keeping unit is comprised of letters and numbers. The numbers and letters provide details about the product, such as the brand, model number, color, etc.

Each company follows its own way of creating SKUs for its products, and there is no incorrect way of making an SKU. With that being said, there are some best practices when constructing an SKU for a product:

To ensure your products are properly tracked and managed, it’s important to follow these guidelines for creating unique SKUs:

1. Never reuse a SKU and ensure each product has its own unique identification code.

2. Keep SKUs short and easy to read, as long codes may not be compatible with certain inventory systems.

3. Avoid using spaces or special characters in SKUs, as these can cause confusion for those using the codes.

4. Be mindful of letters that may be mistaken for numbers, such as “O” and “I,” and avoid using them in SKUs.

How Does SKU Work?

A SKU, or Stock Keeping Unit, is a code that is used to identify and track products in a retail or inventory setting.

Think of it like a unique ID number for each product. It helps businesses keep track of what they have in stock, what needs to be reordered, and how much it cost.

It also helps retailers to keep track of multiple versions of the same product, such as different sizes or colors.

It’s important to make sure each product has its own unique SKU, so that there’s no confusion between different products in the inventory. It’s also important to use a system that makes it easy to find, read, and use the SKUs.


In conclusion, a Stock Keeping Unit (SKU) is a code that helps businesses keep track of their products in inventory.

It acts as a unique identifier for each product, allowing businesses to easily track and manage their stock levels.

It is important to make sure each product has its own unique SKU and to use a system that makes it easy to find, read, and use the codes.

This helps to ensure that products are properly tracked and managed, which ultimately helps businesses to operate more efficiently and effectively.

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