What is a stock keeping unit (SKU)?

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Inventory Saving Unit (SKU) is a scannable barcode to help vendors track inventory movement automatically

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What is a stock keeping unit (SKU)?
What is a stock keeping unit (SKU)?
The Inventory Conserving Unit (SKU) is an essential part of inventory management, for any organization involved in the sale of products, is a unique code assigned to each product in the store, where it is used to determine the price, manufacturer and other product-related information.
SKU codes refer to internal product inventory codes, consisting of eight or more digital alphabets, it is unique for each store, warehouse and seller of e-commerce, so how does SKU work and what is its importance?, All these questions and more we will learn about his answer in our next article, just read on.


How does the Stock Saving Unit (SKU) work?

Each digital alphabet in the Inventory Conservation Unit (SKU) represents product-related information, such as price, size, pattern, color and manufacturer, since the codes are unique to each company, can be customized to suit business needs, for example, the information contained in the codes can be based on what customers often ask.
C1 can be customized for sweaters, while C2 can be customized for sweaters, while B1 refers to red and B2 for blue, while if S11 refers to small and S12 to medium, the inventory preservation unit (SKU) for a small red cotton jacket will be C2B1S11, and the more detailed the information, the longer the number, which can make it more confusing for the workforce, thereby increasing the risk of shipping or packing errors, so retailers often adhere to the most important product characteristics when creating an inventory conserving unit (SKU).


How are stock saving units used?

Inventory Saving Unit (SKU) is used, as we indicated to track and control product movements and inventory, and through active selling point (POS) or warehouse management system, these SKUs and products are inserted into the system until it recognizes them, and once the product is checked on exit or by warehouse staff, the system automatically tracks your inventory, and the only thing you should do is scan the barcode (reserved for SKU).
SKUs also aim to manage them using ERP or order management software, and employees better understand this digital alphabet code as well, however, it is the company itself that sets its SKU parameters, because a warehouse with several hundred different products is not the same as a warehouse with only ten products.
Therefore, inventory references typically have specific features such as color and size, SKUs usually have a maximum of 12 characters, but it depends on the company, for example, a pair of Converse white sneakers may have the following SKU in the shoe warehouse: CONV-02-38, here, the first field is assigned to the brand name, and the second for the color using the number.

Advantages of Stock Saving Unit (SKU)?

The Inventory Saving Unit (SKU) makes it easy to track inventory movement, along with helping retailers manage their entire inventory, and these codes can also offer some other advantages, namely:

Product classification

Retailers with many different forms of a particular type of product, can use the inventory saving module (SKU) to distinguish each, by adding unique product codes, they can prevent confusion at all levels of the supply chain, which can help reduce costly errors.

Inventory Management

Can an inventory saving module (SKU) be used to monitor and manage inventory? Where managers can use these codes to make sure there is no stock contraction, products may tend to be damaged or lost at any point in the supply chain, so having an inventory conserving unit (SKU) makes it easier for managers to accurately identify items, and they can also use the codes to determine whether theft is involved.

Stock Replenishment

Managing large quantities of inventory can be stressful for businesses of all sizes, but with an inventory saving unit (SKU), managers can easily determine the quantity of products they have available, and they can reorder when inventory falls to ensure you never run out of product, especially the most popular products.

Determination of profits

Inventory Conserving Unit Tracking (SKU) can give entrepreneurs important business insights, as they can determine what type of product is selling quickly, likewise, they can determine which ones are less popular, as well as other ideas provided by Inventory Keeping Unit (SKU), which will help make informed decisions that make them more profitable.

Sales trends

Retailers can collect data from their SKU system, so as to determine seasonal trends based on different customer segments, this allows them to replenish their supply based on expected customer behavior, allowing them to enhance profitability and customer satisfaction.

Customer Assistance

Scanning the Stock Saving Unit (SKU) makes it easier for retailers to provide product information to consumers looking for alternative versions, This can increase customer satisfaction and improve sales efficiency and sales representatives in retail stores will not have to go back much to the supply room to check if some products are still in stock They can simply scan a code using a portable scanner to verify that information.

Publicity and Marketing

The inventory conserving unit (SKU) allows retailers to use the data they collect from the inventory conserving module (SKU) systems, to identify advertising and marketing methods that maximize sales.

Best Practices of Inventory Conserving Unit (SKU)

The Inventory Conservation Unit (SKU) has a simple business logic, which consists of unique letters and numbers for each product, each company has a way to develop its own inventory conservation unit (SKU), and some of the usual practices that are included during the creation of SKU are:
  • - Stock Saving Unit (SKU) codes should be unique, while not being reused, so as not to fall into duplication and confusion.
  • - Make sure you adhere to the basic details of your products, such as color, size, type and seasonal changes, which should be included in SKU to facilitate the identification of items in your inventory.
  • - Special letters should be avoided at all times, for example avoid letters such as O, which can easily be confused with zero (0).
  • - Avoid using the code '/' because Excel may coordinate your SKU code as a date instead.
  • - The goal should be to keep the storage codes shorter.
  • - You should have a point-of-sale system or a way to digitally track inventory, set SKUs, and manage inventory as a whole.
  • - Organize item details according to their importance, thinking about their most important characteristics and use them to create your own SKUs.


Stock-keeping units or SKUs are a unique form of product definition, each item has its own SKU code which is used to track inventory across companies, the presence of these codes allows you to continue to run effective and successful businesses.

other topics:



1. << SKU Full Form in Retail: An In-Depth Analysis>>, indianretailer.
2. <<How Many SKUs Should You Stock?>>, mg Magazine

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