Stock Keeping Units (SKU) in Inventory Management
Efficient inventory management is the backbone of any successful retail or distribution operation. At the heart of this process is the Stock Keeping Unit, commonly known as an SKU (pronounced es-kay-YOU or SKEW). An SKU serves as the fundamental unit of measure used to manage the stocks of a specific material, ensuring that businesses can track exactly what they have and what they need to reorder.
What is a Stock Keeping Unit?
An SKU is a distinct type of item used for sale, purchase, or tracking within an inventory. While it can refer to a product or a service, it specifically encompasses all the attributes that distinguish one item type from another. For a physical product, these distinguishing attributes typically include the manufacturer, material, size, color, description, packaging, and warranty terms.
When a business performs an inventory count, it does not simply count total items; it counts the quantity available for each specific SKU. This granularity allows managers to identify which specific variations of a product are selling and which are stagnant.
SKUs as Unique Identifiers
In practical application, an SKU often refers to the unique alphanumeric code assigned to a product. These codes are frequently represented as barcodes to facilitate rapid scanning and tracking within a warehouse or storefront. Unlike some other industry standards, SKU identifiers are not regulated or standardized; they are internal to the business.
When receiving goods from a vendor, a company has two primary options: they can adopt the vendor's existing SKU system or create their own internal coding system to better suit their organizational needs.
SKUs vs. Global Trade Item Numbers (GTIN)
It is important to distinguish SKUs from Global Trade Item Numbers (GTIN). While SKUs are internal and flexible, GTINs are standardized global tracking units used across different companies and borders. Common examples of GTINs include:
- Universal Product Code (UPC)
- European Article Number (EAN)
- Australian Product Number (APN)
Key Facts
- Definition: An SKU is the smallest unit of measure for managing stock levels of a specific item type.
- Attributes: SKUs distinguish items based on size, color, manufacturer, and packaging.
- Customization: SKU codes are not standardized and can be created internally by a business.
- Tracking: They are often implemented via barcodes for efficient scanning.
- Difference from GTIN: SKUs are internal identifiers, whereas GTINs (like UPC and EAN) are global standards.
Comparison of Inventory Identifiers
| Feature | Stock Keeping Unit (SKU) | Global Trade Item Number (GTIN) |
|---|---|---|
| Standardization | Internal / Non-standardized | Global Standard |
| Scope | Company-specific | Universal across supply chain |
| Examples | Custom internal codes | UPC, EAN, APN |
| Purpose | Internal inventory tracking | Global product identification |
Frequently Asked Questions
What exactly does an SKU track?
An SKU tracks a distinct type of item based on its unique attributes, such as color, size, and manufacturer, allowing a business to manage the exact quantity of each variation in its inventory.
Are SKU codes the same for every company?
No. SKU identifiers are not regulated or standardized. Each company can choose to use the vendor's SKU or develop its own unique internal coding system.
How is an SKU different from a UPC?
An SKU is an internal code used by a specific business for its own tracking, while a UPC (Universal Product Code) is a type of GTIN, which is a standardized code used globally to identify products across different retailers and distributors.
Can a service have an SKU?
Yes, an SKU can refer to a distinct type of item for sale, purchase, or tracking, which includes both physical products and services.
Why use barcodes for SKUs?
Barcodes allow for the rapid scanning and tracking of SKUs, reducing manual entry errors and increasing the speed of order fulfillment and inventory counts.