A stock keeping unit, or SKU for short, is a storage unit that can be uniquely identified by a code and is stored in a company's system.

Definition SKU

The abbreviation SKU stands for Stock Keeping Unit and is an alphanumeric code used to track inventory in a warehouse and measure sales by product and category. This can be a single item or multiple, exactly identical items. SKUs are usually generated by the ERP system, while the warehouse management system manages the codes.

What is a SKU made up of?

SKUs are divided into classifications and categories and identify products by numbers or letters according to characteristics such as brand, model, color, type, size, etc. The length of the SKU is variable. The length is variable, usually between 8-12 characters. A SKU must be clearly distinguishable and unmistakable.

Example of a SKU

In the clothing sector, a T-shirt can be identified with the SKU 0815-38-B. 0815 would then be the stock unit, 38 the size and B (blue) the color code. The SKU can be supplemented with other information: Storage location, best before date for food, warranty period, etc.

What is the purpose of SKUs?

A SKU uniquely identifies items and distinguishes them from other items. The data is recorded in the inventory management system so that sales and stock can be accurately tracked. The results can be used to measure the profitability and efficiency of the business. Therefore, SKUs also play an important role in overall supply chain management. They help determine inventory levels, can trigger a low inventory warning, or track orders. 

Advantages of SKUs at a glance

  • Inventory management: Accurate overview of inventory, easy traceability and determination of availability, flow and inventory turnover
  • Easier inventories due to better reconciliation of stock levels
  • Transparency and easy tracking of items along the supply chain
  • Easier identification of "winning" and "losing" products
  • Better internal communication between warehouse staff and vendors
  • Triggering of new orders

Differences between SKU and EAN

A SKU code is often equated with an EAN (European Article Number) or UPC (Universal Product Code) code. However, EAN and UPC barcodes consist only of digits and bars of varying thickness and height and are based on international specifications. They provide information to identify manufacturers, marketing companies, origin of production, etc. These barcodes are therefore valid outside a company and remain unchanged throughout the supply chain. The SKU code, on the other hand, is only used within a company and can therefore also be marked differently along the supply chain in different companies. The information of the SKU therefore also only refers to internally important characteristics: Size, color, storage location, etc.

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