What is SKU? Definition, Functions, and More

SKUs are widespread. Chances are that you interact with them every day, buying products at the grocery store or watching delivery professionals scan them in before they hand you a package.

But you might not quite know what SKUs are and how they work. In this article, we’ll provide an overview of stock-keeping units (SKUs). We’ll discuss the elements that go into a SKU number, SKU meaning, how to use SKU lookup, and why these handy codes are beneficial to your business. 

What is a Stock Keeping Unit (SKU)?

Often presented as a scannable barcode, a SKU is an alphanumeric code of eight or more characters that can be used by retail and online stores to identify a specific product. 

They are different from manufacturer product numbers, or MPNs, which come from the manufacturer. The primary difference? SKUs are unique to a given retailer. 

SKUs vs. UPC Codes

Although they may look somewhat similar, SKUs are not the same thing as universal product codes (also referred to as UPCs). 

A UPC identifier has 12 digits. It is scanned in at warehouses or at a point-of-sale. UPCs appear on every product in the United States, but unlike SKUs, they are universally shared across any business that uses them. So while a retailer creates SKUs for their own inventory, the products arrive with UPCs already on the packaging.

Because a product’s UPC doesn’t vary by store in the way that a SKU does, the UPC for an item will be the same; regardless of which store it was sold in. Suppliers and manufacturers use these codes to track inventory across multiple stores. 

SKU Importance and Benefits

SKUs make it possible to keep track of different characteristics of products, such as the brand, color, style, and size. You can use a SKU lookup to find out whether you have a specific product in stock. 

SKUs can be used to track inventory, a task that’s crucial to any successful business. They are usually broken down into classifications and categories to make inventory easier.

Each item in a store’s inventory has a SKU, which makes it easier to know when items are sold and when it is time to restock. 

Not only are SKUs essential for good product management, but they can also be useful for analyzing buying trends. With detailed information about sales trends, you can forecast more accurately. More accurate forecasting can help you to avoid both stockouts and overstocks, saving your business money. 

Tracking inventory by SKU numbers can result in more robust, informative reporting. You can easily determine how many certain, specific items were sold in a given time period using SKUs. This can help you to assess sales performance for specific products during or between seasons.

Data from SKUs can also be used for cross-promotional sales strategies and to develop marketing campaigns. Tracking inventory can let you know which products are the most profitable. They also let you know how popular individual variants of products are. 

In addition, SKUs are useful for several other things, which include:

  • Streamlined ordering 
  • Keeping all systems up-to-date
  • Expediting business sales
  • Easily handling terminology differences between systems

We’ll explore each of these in-depth below.

Streamlined Ordering

SKUs are vital in helping stores track inventory. Because a SKU number breaks product information down into size, color, style, and other variants, you’ll know exactly what you need to order. Accurate inventory can help you maximize your profit.   

If you use the SKUs from suppliers to place orders for products, it is more likely that you will receive exactly what you requested because your system and the supplier’s system can refer to the exact same product in the exact same way. 

Keeping All Systems Up-to-Date

If all systems refer to individual classification and category of products in the same way (for example, large, green, long-sleeved, ruffled shirts) using the SKU, it is easier for systems to be kept up to date. 

SKUs can also help business owners to manage unit stock by identifying products that are slow-moving; which can help to prevent overstock on these items. Since SKUs can help you identify what you are low on or what is out of stock, you can quickly order more.   

Expedite Business Sales 

If your inventory is organized, you can expedite stocking. SKUs can be scanned at the register to quickly ring up customers. If customers would like a different version of a product (for example, a medium, black, short-sleeved shirt instead of a white one), a salesperson can use the SKU lookup to determine whether it is available. 

If your store is shipping products to customers, SKUs can help to expedite the shipping process by making specific products easier to locate in your inventory.  In addition, if customers have questions about an order or product, they can reference the SKU number on their invoices. They can also search your online site for a specific product by the SKU number. 

Easily Handle Terminology Differences Between Systems

If you integrate systems — for example, your ordering system and your eCommerce platform — you’ll need one identifier for each product. Different systems may have unique descriptions for each product. 

However, with a SKU number, each system will refer to the product the same way; which will not only avoid confusion, but also give you a more accurate, consistent picture of what’s going on with your products, ordering, and inventory.

Using SKUs in eCommerce

SKUs are not only practically indispensable when it comes to inbound and outbound logistics, but they can also be helpful when you’re working with a third-party fulfillment provider. 

A new third-party logistic provider, or a 3PL, will likely want to know how many different SKUs you have in your inventory. The 3PL can offer a number of services to your business based on SKU numbers alone. These services include:

  • Merging and tracking products across eCommerce platforms
  • Increasing accuracy of inventory storage and picking lists 
  • Kitting and assembling products in a specific way prior to shipping to customers
  • Bundling different SKUs for promotions
  • Developing real-time inventory sorted by SKU number
  • Setting reorder points based on quantity to be able to restock in a timely manner
  • Automatically synchronizing inventory by using your online SKU numbers 

As you can see, SKUs are invaluable in a brick and mortar store, but they can be used to streamline your online business, as well. 

SKUs Made Simple

SKUs don’t have to be confusing. In fact, SKUs are an extremely useful and beneficial business tool. They can be used to track inventory, provide analytical data, and keep your systems up-to-date and consistent. SKU numbers can assist with streamlining orders and expediting sales, too. 
As you expand your online business, SKUs can also help a 3PL organization like Print Bind Ship maximize your business by managing the transportation and logistics of your products. To find out how we can streamline the logistics of your supply chain, contact us today to learn more!