So exactly what is the purpose of a SKU? Stock keeping units are alphanumeric serial numbers that help you identify individual products. SKUs are unique identifiers only used by your business, so you can set them up anyway you like.
Each part of the SKU corresponds to a product detail. So theoretically, you should be able to look at a product SKU and immediately identify relevant details like color, brand, and size.
So let's say you’re running a clothes store. You might decide that you want your SKUs to track item manufacturer, style, color, and size. In that case, you could come up with a numeric code to represent each detail (like “0001” for blue and “0002” for red). Or you could use letters. Or both, like in the example below:
We’ve decided to represent the manufacturer information for this item with a numeric designation (1001). Then we have a numeric representation of the clothing style. In this case, “20” means this item is a top, while “11” specifies that it’s a T-shirt. Next we have a four-letter representation of the color (purple), followed by a four-letter code for the size (extra small).
Again, you can set up your SKUs any way you like. And as long as you’re consistent, anyone familiar with your SKU system should be able to identify an item’s manufacturer, style, color, and size simply by checking out the item SKU.
Of course, not all of us were gifted with a perfect memory. That’s where barcodes come in handy.
SKUs can easily be made into scannable barcodes, which should pull up all the product information automatically. This keeps your inventory system accurate while offering several advantages that we'll discuss later.
Like we mentioned, SKUs are unique numbers used only by your business. However, SKUs aren't the only numbers that can be used to identify your products. These are often confused with the following types of item numbers:
- Universal product code (UPC): This is an item code used by all businesses selling that item.
- Manufacturer code: This is the code assigned to the item by the manufacturer. Manufacturer codes usually help production companies identify the item’s batch number and parts details (just in case they’re needed for warranty or recall purposes).
- EAN codes: The European Article Number codes are very similar to UPC barcodes—they’re just in the format preferred in Europe.