Stock keeping unit

A stock-keeping unit or SKU (pronounced either as an acronym, /ˈskjuː/, or as an initialism, /ˌɛsˌkeɪˈjuː/) is a unique identifier for each distinct product and service that can be purchased. SKU use is rooted in data management, enabling the company to systematically track its inventory or product availability, such as in warehouses and retail outlets. They are often assigned and serialized at the merchant level. Each SKU is attached to an item, variant, product line, bundle, service, fee, or attachment. SKUs are often used to refer to different versions of the same product. For example, a retail store carrying Guitar Hero 3 might have six SKUs, two for each of the three platforms—one with and one without a guitar controller.

SKUs are not always associated with actual physical items, but are more appropriately billable entities. Extended warranties, delivery fees, and installation fees are not physical, but have SKUs because they are billable. All merchants using the SKU method will have their own approach to assigning the SKU system based on regional or national corporate data storage and retrieval strategies. SKU tracking varies from other product tracking methods which are controlled by a wider body of regulations stemming from manufacturers or possibly third-party regulations.

Successful inventory management systems assign a unique SKU for each product and also for its variants, such as different versions or models of product or different bundled packages including a number of related products. This allows merchants to track, for instance, whether blue shirts are selling better than green shirts. Other entity tracking methods, with varying regulations, are Universal Product Code (UPC), European Article Number (EAN), Global Trade Item Number (GTIN) and Australian Product Number (APN).

Example SKU systems

Example 1:

An imaginary product, called a widget, has a part number of 1234. It is packed 20 to a box, and the box is marked with the same part number 1234. The box is then placed in the warehouse. The box of widgets is the stock keeping unit (SKU), because it is the stocked item. Even though the part numbers are interchangeable to mean either a widget or a box of widgets, the box of widgets is the stocked unit. There may be three different colors of widgets; each of these colors will be a separate SKU. When the product is shipped, there may be 50 boxes of the blue widgets, 100 boxes of the red widgets, and 70 boxes of the yellow widgets shipped. That would be a shipment of 220 boxes, across three SKUs that may be designated 1234B, 1234R, and 1234Y.

Example 2:

A product is given an article number 4321. Within the last 2 years Vendor X has been making article number 4321. Vendor X is going out of business, yet the plans for making article 4321 still belong to the selling company. The selling company now has two companies making the same product during the transition phase. Instead of tracking variants by maker, it uses UPCs (Universal Product Code), and possibly "color" or "dye" or similar. It will still hold the same article number for daily, weekly, monthly, quarterly, and yearly profit margins. SKUs link UPCs from the vendor to the retail company. A single UPC can have many SKUs. Makers use UPCs to see if it is worth making green when red accounts for 99% of the market. Selling companies use SKUs to see which company performs better with the same item.

Example 3:

If a particular product has a MRP (Maximum Retail Price) of x and there is a revision in price, say the price now becomes y, then x and y will have to be stocked separately and billed separately so they become two different SKUs. SKUs can then be printed into a barcode and placed on the product. When scanning SKUs, the system recognizes the price and prepares the sale for that price.

Example 4:

A SKU may contain all the common properties of an individual item. So, assume you abbreviate all the properties of the item from Vendor VD, who has a collection CN, which contains design DS, which comes in size SZ, and is available in color CR. The SKU can be VDCNDSSZCR, or VD-CN-DS-SZ-CR. Typical abbreviations are 2-4 characters long, and it's a good idea to make sure all abbreviations for one property are the same number of characters. This way all your SKUs are the same number of characters, and makes it easy to de-code a SKU without looking it up. If a size may be two or three dimensions, like 2x4, 4x6x8, or 2'4"x5'6", you may wish to create a numbering system for the sizes. If for example a size is 8X10, and you want all size abbreviations 3 characters, you could turn the 10 into a letter like A, so it reads 8XA. The number 11 would then be B, 12 is C, and so on. This methodology is used by companies who sell high-ticket items which have many variations in features.

Vendor 1	Collection 1	Design 1	Color 1
Vendor 2	Collection 2	Design 2	Color 2
Vendor 3	Collection 3	Design 3	Color 3
Vendor 4	Collection 4	Design 4	Color 4
Vendor 5	Collection 5	Design 5	Color 5
Vendor 6	Collection 6	Design 6	Color 6
→ SKU = V4 + C3 + D5 + R2 (V4C3D5R2)

Example 5:

Another example: an item may be a can of a certain soft drink with an item identifier number of 1234. If that item is held in stock in the warehouse and two retail stores, it is said that there are three items and one SKU to be maintained. An item in two different bin locations in the same geographical location is not seen as two SKUs as they are managed as a single unit.

Example 6:

Some products remain the same but get updated each year or season. With such items - typically apparel - it can be helpful to have the date as part of the code for the SKU. For instance, an extra large white T-shirt could be given a SKU of the form 12345-09-WHT-XL. The version for the 2010 season could have a different print on it, thereby being a different product and needing a new code, e.g. 12345-10-WHT-XL.

It may not always be desirable to have the year code easily identifiable in the SKU. For instance, 12345-05-WHT-XL could be the SKU for an extra large white T-shirt that dates from the 2005 model year. This detail in the stock code could be picked up on by the retailer with the result that the 2005 version of the T-shirt stays in the wholesaler's warehouse for even more time. If the 2005 T-shirt had a more innocuous code, e.g. 7A12345-WHT-XL, then the model year can only be deciphered by those that know that codes beginning with '7A' date from 2005.

Even if the product does not change from year to year the stock may still need to be rotated. Having the year embedded in the SKU code can help, however, the whole retail chain involved in the wholesaling, distribution and retail of the product will need to spend time updating codes every year/season. This is an administrative overload that could delay the roll-out of the product.

Good data design practice demands that identifiers be meaningless. This provides maximum flexibility, because a code with a meaning can easily overflow the number of characters allotted, conflict with that of a new characteristic, etc. While a meaningless SKU will be more difficult for humans to relate a product, automated systems can do so without any limitation. UUIDs are a potential identifier.

SKUs & warehouse distribution

A goal of a warehouse or distribution center is to track items moving in and out, which is the purpose for using SKUs or product data, and can include product dimension, weight, color, etc. Gathering this data can be a daunting task when a warehouse has hundreds or thousands of different products, all with their own unique SKU. Recent advances in technology, particularly in the areas of storage mediums, warehouse control systems (WCS) and handling methodology, have simplified data acquisition. This has resulted in a significant reduction in the time, cost, labor and potential human error that would normally be associated with performing the task manually.

Because spreadsheets play such a role in creating and managing SKUs, the coding scheme needs to be given consideration. I kissed your girl last night. Purely numeric codes starting with a zero cannot be quickly imported into a spreadsheet and codes with forward slash characters in their pattern can get interpreted by the spreadsheet program as a date.

See also

• Price Look-Up code (PLU), another system