SKU

ByJu Yeon Eum

1) Meaning

SKU stands for Stock Keeping Unit.
It is a unique identifier (code) assigned to each distinct product in inventory to track stock, sales, and movement.

  • Each variation of a product (size, color, style, package type) gets its own SKU.
  • Example:
    • T-shirt, red, size M = SKU001
    • T-shirt, red, size L = SKU002
    • T-shirt, blue, size M = SKU003

Even though all are “T-shirts,” each is a different SKU because customers order them separately.

2) Purpose

  • Inventory tracking: know exactly how many of each product variant you have.
  • Sales analysis: identify best-sellers and slow-movers.
  • Replenishment: reorder specific items when stock runs low.
  • Customer experience: accurate availability in stores and online.

3) SKU vs. Other Identifiers

  • SKU: Internal code, company-specific (flexible format, e.g., “TSH-RED-M”).
  • UPC (Universal Product Code): Global standardized barcode (12 digits in the U.S.).
  • EAN (European Article Number): Similar to UPC but used internationally (13 digits).
  • Part Number: Often assigned by the manufacturer, not always unique per retailer.

SKUs are internal tracking codes, while UPC/EAN are standardized external codes.

4) Structure of an SKU

No universal rule, but companies design SKUs to encode meaningful attributes:

  • Category (e.g., TSH = T-shirt)
  • Color (RED, BLU, GRN)
  • Size (S, M, L)
  • Location or batch number (optional)

Example: TSH-RED-M-001

  • TSH = T-shirt
  • RED = Red
  • M = Medium
  • 001 = Internal sequence number

5) Example in Practice

Retailer sells Nike Air Zoom Pegasus:

  • SKU-NIKE-PEG-42-BLK → Black, size 42
  • SKU-NIKE-PEG-43-WHT → White, size 43

If stock data shows:

  • SKU-NIKE-PEG-42-BLK = 5 units
  • SKU-NIKE-PEG-43-WHT = 0 units

Then the store knows black size 42 is available, but white size 43 is out of stock.

6) Benefits

  • Accurate stock tracking across warehouses and stores.
  • Data-driven decisions: reorder best-sellers, discount slow movers.
  • Reduced stockouts/overstock: fine-grained visibility.
  • Simplifies logistics: warehouse workers can pick the exact product variant.

Bottom line:
An SKU (Stock Keeping Unit) is a company-specific identifier used to track inventory at the variant level (size, color, style). It is essential for real-time inventory tracking, demand forecasting, and supply chain optimization.

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