What Is an SKU Number? (And How to Create One)

By Indeed Editorial Team

Published June 2, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

An SKU number, or stock keeping unit number, is a unique sequence of alphanumeric characters on a product's barcode that holds important information to help categorize it. Many retailers and departmental stores see SKU numbers as an essential tool to help them track sales and classify products in the store based on characteristics like, size, shape, utility, and price. Learning more about SKU numbers can help you track sales, manage inventory, and provide more informed customer service in a retail environment. In this article, we answer the question, "What is an SKU?", explain how to generate them, and provide some tips for using these codes effectively.

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What is an SKU number?

Understanding the answer to the question, "What is an SKU?" can help you use it more effectively in your workplace. An SKU number is a set of symbols and alphanumeric characters that represent a product in a store. Each product in the store has its own unique number, which helps employees identify it. The employees put the numbers on the products and scan them to keep track of the business' inventory. Different retailers have their own unique way of generating and organizing numbers, though it's best for them to begin with letters instead of numbers.

The alphanumeric sequences signify key characteristics and information about the products, such as:

  • Price: This is an important characteristic because it signifies the retail price of the product and helps categorize it during sales or special offers.

  • Category: This characteristic provides employees with information about the type of product and its category to help them classify and organize it in the store.

  • Size: This signifies the size of a product and is typically useful for garments, footwear, and accessories.

  • Colour: Classifying products based on color makes it easier for employees to know where a specific product is inside the store.

  • Brand: Retail stores and outlets have products from a host of brands and this helps employees organize products based on their brands. For example, shoes by Brand A may go into a section dedicated to that brand.

  • Gender: Stores classify products such as garments, footwear, cosmetics, and skincare products based on that product's target audience.

  • Store location: This signifies where the product is within the store. For example, an employee can scan the SKU to know that a particular box of cereal is on aisle four.

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What is the importance of SKUs?

SKUs are essential for organizing and maintaining inventory. Retail companies use SKUs to:

  • Maintain organization: Retail associates scan a product's SKU to determine its type and where it belongs. They may put similar products together inside the warehouse or stockroom, making it easier for the store to keep track of the products in the inventory.

  • Record changes: If a customer is unsatisfied with a product, they may opt to return or exchange it. SKU numbers help retail stores to keep track of the inventory by providing them with an accurate measure of the number of products that they have in stock.

  • Streamline distribution: Warehouse employees identify the location of a product in the warehouse by scanning the SKU number, giving them essential details about the product. They can then find the product and ship it to the customer efficiently.

SKU vs. UPC number

Both the SKU and universal product code (UPC) numbers are on the barcode of any product. Listed below are some differences between them:

  • Purpose: The SKU details the product's features, type, and price, while the UPC number relates to the company that manufactured the product.

  • Uniqueness: SKUs are unique; even if there are two units of the same product, their SKU numbers are different. The UPC number is the same on every product from the same manufacturer regardless of its inventory location.

  • Length: The UPC number always has 12 numerical figures. SKU numbers run between 8 and 12 symbols and include numbers and letters.

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How to generate an SKU number

The following steps can show you how to create SKUs for the merchandise efficiently:

1. Categorize your stock

You can decide how you wish to organize your stock. Categories may depend on how big a business' inventory is and the various products that it sells. If stock is small- to medium-sized and the products are similar, SKUs can be simple like “A001234B”. If the inventory is large and contains a lot of variety, SKUs can be intricate like “A#WMCPBLK001457032”, where different characters relate to different categories. In this example, “A” means “clothing”, “#W” means “women”, “M” means “medium”, “CP” means “cotton pants," and “BLK” means “black." The numbers that follow these denote the location within warehouses.

2. Determine the length of the SKU numbers

The length of the SKU number is the number of characters and symbols it has. Any unit has at least eight characters that help describe the various characteristics of your products. In the example provided above, the store uses a combination of letters, numbers, and symbols in a product's SKU number. Each character denotes a specific meaning that provides information about the product. It's important to use characters and assign specific meanings as this helps categorize and divide inventory efficiently.

3. Attach sequential numbers to the end of the unit

Attaching sequences to the end SKU numbers is essential for product classification. It can help employees differentiate between older and newer products. Products can have similar colours, brands, designs, and sizes. The numbers at the end of the SKU number show the product's release time. For example, if a brand launched product A in March and product B in November, you can differentiate between the products using numbers at the end of the sequence. The sequence may be “CK#MWBLU345001” and “CK#MWBLU345002” for product A and product B, respectively.

Tips for generating SKU numbers

You can follow some additional tips to help you generate SKU numbers efficiently to boost productivity in a store or warehouse to save time. Below are some essential tips to follow for assigning SKU numbers to the retail inventory:

1. Use a simple format

A simple format makes SKU numbers easy to read, understand, and interpret, especially for employees. Ordering the characters of the SKU number from the most to least important characteristics of the product is an efficient way of classifying your inventory. Sequence it in an effective and easy-to-understand manner to help employees identify the information that matters most to them. Doing this ensures that employees decipher the category and put the product in the appropriate department. It also makes it easier to train new personnel and employees and helps them understand the company's retail management system.

2. Be consistent

It is essential to ensure that the number of characters in the SKU numbers is consistent and that different numbers differentiate between product categories. It's also important to avoid numbers or characters that resemble each other. For example, most companies avoid using the number zero and the letter “O” to prevent confusion. As the business scales up and expands, it may sell a wider variety of different products. It can then generate more symbols in the same format that can help distinguish old products from newer products.

3. Reuse SKU numbers

Reusing SKU numbers of permanently discontinued products is beneficial. You may choose to wait a few years before removing the old products from your retail system and discarding them. You can then attach the previous SKU numbers to new products without creating confusion. Recycling SKU numbers for a new product that is similar to an old product makes classification easier. For example, if you sell lipstick, you may choose to reuse the SKU numbers from a discontinued glossy red lipstick on a new glossy red lipstick.

4. Invest in SKU number generators

An SKU number generator is an application that creates stocking units. Typically, this software requires you to enter the characteristics of your product. It then generates SKU numbers for products based on these characteristics. A generator may be helpful if your inventory is large and contains a variety of diverse products with intricate SKU numbers.

Example of an SKU number sequence

A fashion boutique wants to create SKUs for their different varieties of products. The store divides each product into various categories and assigns each product category with a unique identifier. For Jackets, the store uses the code "JKT" for shoes, "SHO," for handbags, "HNDBG," and for Denim Jeans, "DNMJNS." The products get further categorized based on their brands. Jackets from brand "A" for example, would have "JKT-A." Handbags from brand "C" would have the sequence, "HNDBG-C."

After categorizing the product based on the type and the brand, the next step would be to separate them on their colour and size. For example, black shoes by brand L, size 9 would be "SHO-LBLK9." The last step would be to assign the number of the product in the inventory. Doing this helps the store keep a track of the product and the amount of inventory left. If there are a 100 units of the black, size 9 shoes by brand L, the boutique categorizes them as, "SHO-LBLK9#001."

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