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What is a SKU?

A SKU may be used by a company to monitor how many warranties are being sold at business locations.
Boxes of inventory with SKUs.
SKUs are typically printed in barcode format so that they can be scanned.
A SKU on a pencil.
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  • Written By: Mary McMahon
  • Edited By: O. Wallace
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  • Last Modified Date: 01 October 2014
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A stock-keeping unit (SKU) is a unique number that is used to identify a billable item in a company's inventory. Using these numbers, companies can keep track of the quantities they have in inventory, and they can manage inventory effectively with the use of computerized systems, rather than having to keep track of everything by hand. SKUs are usually unique to the companies where they are used, which means that an identical product can have different numbers if it is handled and sold by different companies.

A company can assign a SKU number to a physical item, such as a box of plates for sale. These numbers can also be used to identify services and more intangible entities, like warranties, creating a system that can be used for tracking and billing. In the case of something like a warranty, using SKUs allows a company to keep track of how many warranties are being sold at various locations, and how many warranties contracts it has out for its products in total.

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When a stock-keeping unit is assigned, the number reflects the smallest possible unit that a store will stock. In a warehouse, this is typically a box that contains multiples of the same item, while individual stores would assign a number to each individual item. This can be confusing for consumers, because boxes and single items will often have the name number assigned. While the difference between a box of something and a single item is usually obvious in the store, it can be trickier when ordering products online or over the phone.

In some cases, a SKU includes part of the product number or universal product code (UPC) assigned by the manufacturer, but this is not always the case. In the instances of items that come in several styles, the first part of the number identifies the item, such as 1234 for a pair of pants, and the second part denotes the style, like B12 for “black, size 12.” SKUs are typically printed in barcode format on product labels so that they can be read by a barcode reader, making it easier to track and manage inventory.

A SKU can also be embedded in an RFID tag, so that inventory updates can be made when a product passes an RFID reader. This can be extremely useful when products are moved in high volume, as there will be no need to hand scan individual products and boxes, because the RFID system scans automatically. These systems can also be used to help people locate products in a warehouse, with employees using hand-held readers to home in on specific tags.

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Sara84
Post 3

What kind of inventory keeping system did people use before SKUs? How did they handle large quantities?

Vaclav
Post 2

I used to work at a department store and we used SKUs. We had hand-held scanning guns that worked with the SKUs. We did not have scanners at our checkouts at that time.

They helped us tremendously in ordering and keeping inventory. Sometimes in a store today you will hear a clerk say they have a SKU lookup. Computers have helped a lot in retail, but the SKU paved the way to easier inventory keeping and is still used today.

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