Stock-Keeping Unit (SKU)

A Stock-Keeping Unit (SKU) is a unique identifier assigned to each product to help track inventory and manage sales efficiently.

A Stock-Keeping Unit (SKU) is a unique identifier for each distinct product and service that can be purchased in business. It allows retailers to track and manage inventory more efficiently. SKUs are often used to identify products, manage inventory, and facilitate the accurate tracking of sales and stock levels.

SKUs are not calculated but rather created and assigned to products. They typically consist of an alphanumeric combination of about 8-12 characters. Each character in the SKU represents an attribute of the product, such as its color, size, style, brand, gender, type, and other relevant specifics.

For retailers, SKUs are important because they:

Facilitate Inventory Management: Retailers can track their inventory levels accurately, knowing exactly how many units of each product they have in stock.
Simplify Sales Tracking: SKUs make it easier to monitor which products are selling well and which are not, aiding in sales analysis and forecasting.
Enhance Customer Experience: By using SKUs, retailers can quickly locate products for customers both in-store and online, improving service and efficiency.
Optimize Purchasing Decisions: With clear data on stock movement, retailers can make informed decisions about when to reorder products and how much to purchase.
Prevent Stockouts and Overstocking: By keeping accurate SKU records, retailers can avoid running out of popular products and reduce the costs associated with holding too much inventory.

Creating an effective SKU system involves considering the most important attributes of the products and how best to encode this information into a compact format that is understandable and useful for the business's operations.